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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