Systematic Investment Plans in an ELSS Mutual Fund..!

Systematic Investment Plans in an ELSS Mutual Fund..!

At the start of a fiscal year, financial planners usually advise investors to opt for systematic investment plans (SIPs) in equity linked savings scheme (ELSS) mutual funds.

This not only obviates the last-minute rush where investors park a lump sum in tax-saving funds, but also helps them spread their investments through the year.

1. What is a SIP in an ELSS fund?

ELSS is a type of diversified equity mutual fund qualified for tax exemption under Section 80C of the Income Tax Act.\

Investors have an op tion to start SIPs of a specific amount in such funds for a certain du ration.

Experts advise investors to opt for monthly SIPs, which helps them participate in the stock market without trying to time it, and also brings disci pline to their invest ments.

Investors can choose the growth plan or the dividend plan.

2. How long does it take to start an SIP?

All open-ended ELSS schemes allow investors to make invest ments through SIPs. Some fund houses allow you to choose any day of the month for the SIP.

Investors just need to fill an application form along with SIP and ECS mandates, and submit it to the fund house. It generally takes about 21 to 30 days for the bank to register your ECS mandate. You can also set up an SIP online.

3. What tenure should you choose?

Since investors are looking to stagger their investments over the entire financial year, the SIP should be for a tenure of at least one year.

Fund houses stipulate a minimum time frame of six months for an SIP. Investors can do an SIP for a certain period or even opt for the perpetual option, which means the SIP will continue till the investor gives an instruction to the fund house to stop it.

4. What about the locking period?

In case of an ELSS SIP , every instalment will be locked for three years.

 For example, if you start an SIP of Rs. 12,500 per month on April 1, 2017 for one year.

The first instalment will be locked till April 2020, while the t second instalment will be locked till May 2020, and so on.

5. Can I add lumpsum to my SIP later in the year?

Yes, you can add a lumpsum amount to the same scheme in which you are running an SIP. This does not affect your regular SIP.

Src: ET, Prashant Mahesh

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