Here, we will explain ELSS Lock-In or the 3 year lock-in period for investments in Equity Linked Savings Scheme
As we are aware ELSS stands for Equity Linked Savings Scheme which is a tax saving mutual fund
ELSS is an equity mutual fund which invests in shares
ELSS provides tax deductions of upto Rs 1.5 lakh annually
Being an equity investment, if you stay invested for the long term i.e. 8-10 years, you typically get returns higher than alternatives
This includes alternatives such as debt, real estate and gold
Therefore, ELSS is a combination of tax savings and high returns from an investment
However, some people have confusion or doubts about ELSS lock-in period
For a lump sum investment, the money remains locked in for a period of 3 years
The confusion typically arises from ELSS SIP or SIP in ELSS
Through a systematic investment plan you regularly invest in ELSS
The confusion can also arise from investments in Systematic Transfer Plan (STP)
Where you invest a lump sum in a liquid fund or short-term debt fund or an arbitrage fund
For there regular investments happen in ELSS
In case of SIPs, each instalment has a lock-in of 3 years
In reality, people shouldn't even be bothered about ELSS 3-year lock-in
Remember, equity investments need to be made for 8-10 years and not 3 years
Even after the end of the ELSS lock-in you need to stay invested in an equity fund since you can only get typically high long-term returns then
By end of lock-in you will know about the performance of ELSS over different time periods with respect to scheme benchmarks
You can also compare the performance with other ELSS
Typically, ELSS have well-diversified equity investments that help you benefit from equity investments
If your ELSS has been underperforming regularly with respect to benchmarks and peers, you need to re-invest in a consistently performing diversified equity fund
Then, stay invested in equities overall for at least 8-10 years
It is worth pointing out that ELSS is quite handy in being part of investments for financial goals such as retirement and children's future