Mutual Funds Without Lock-in Period (2024)

FAQs

Is there any mutual fund without a lock-in period? ›

However, most open-ended mutual funds do not have a lock-in period. You can buy and sell their units at any time.

You can sell mutual funds without a lock-in period at any time. There is no restriction on when to sell and how long to hold your investments. Thus, you can exit the scheme once you have made significant returns or when the fund is underperforming.

Understanding ELSS redemption

ELSS Mutual Funds come with a lock-in period, typically three years. During this lock-in period, investors cannot redeem or withdraw their investments. However, once the lock-in period is over, investors have the flexibility to redeem their ELSS units.

You should not simply exit a fund, just because the lock-in period is over. However, many people redeem their investments after the expiry of 3 years. You do have the option of redeeming your investments after 3 years but you should do so only in case of genuine requirement of funds.

If you exit from equity-oriented mutual funds within a year after purchase, your gains will be taxed at a 15 per cent rate. This is known as short-term capital gains tax. However, if you keep an equity mutual fund for more than a year, profits beyond Rs 1 lakh would be taxed at 10 per cent.

Here, information regarding the lock-in period can typically be found in the scheme information document (SID) or the mutual fund scheme's key information memorandum (KIM).

An investment in an open end scheme can be redeemed at any time. Unless it is an investment in an Equity Linked Savings Scheme (ELSS), wherein there is a lock-in of 3 years from date of investment, there are no restrictions on investment redemption.

The lock-in period has many benefits, such as commitment, promoting long-term investing, discouraging impulsive exits, and ensuring wealth generation. 2. What are the lock-in period disadvantages? The lock-in period restricts investors from changing their investments in case of emergency fund requirements.

The ULIP lock-in period is the duration within which you cannot make withdrawals from a ULIP. Once the lock-in period is over, you have the option to withdraw amounts from your plan. The policy term represents the total duration of the ULIP. This may extend beyond the lock-in period.

When it comes to equity, it is very important that, especially when you are thinking about long-term goals, you want to exit as soon as you have 2-3 years left approaching your goal and there are just 2-3 years to get there.

Can you cash out mutual funds anytime? ›

You generally can withdraw money from a mutual fund at any time without penalty. 7 However, if the mutual fund is held in a tax-advantaged account like an IRA, you may face early withdrawal penalties, depending on the type of account and your age at the time.

Withdrawals from your non-Roth balance are generally taxable. Penalties may apply. If you're under age 59-1/2 when you cash out, you may have to pay a 10% early withdrawal penalty on the taxable portion of your distribution.

You need to pay the surrender charges levied by your insurance provider. These are the charges for cancelling the policy during its lock-in time frame. You may cancel your ULIP policy during its lock-in period. However, your money will only be returned after the completion of five years.

Lock in periods for different investment

ELSS mutual funds are kept for 3 years usually. Tax saving Fixed Deposits are locked in for 5 years. 8% Government of India bonds are locked up for 6 years. ULIPs are locked in for a minimum of 5 years.

We have seen that an investor cannot withdraw or redeem the amount invested or allocated units during the lock-in period. Closed funds typically come with a lock-in period. During the lock-in time, we call mutual funds the closed funds. ELSS funds come with a lock-in period of three years.

Can one withdraw mutual funds anytime? Redeemable at any time, open-end schemes offer flexibility for investors. Yet, ELSS investments differ, imposing a mandatory three-year lock-in period.

Open-ended mutual funds are schemes in which you can buy or sell units on any business day. In these funds, units are purchased and redeemed continuously. They do not have any fixed maturity or lock-in periods.