As an investor, you may have invested in Equity Linked Savings Schemes (ELSS) or ELSS funds to benefit from tax breaks and market-linked returns. However, the three-year lock-in period means that your money is locked in for that period. Choosing the right exit strategy can help you maximise your returns and meet all the necessary financial objectives.
Understanding how each method works will help you choose the best option based on your financial goals and risk tolerance.
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Different Exit Methods of ELSS Redemptions
The ELSS funds allows you to claim up to Rs 1.5 lakhs deductions under Section 80C of the Income Tax Act. Investing in ELSS mutual funds provide the dual benefit of tax savings and capital appreciation over the long run. Here are four key exit methods you can consider:
| Exit Method | Description |
| Tactical Exit | Involves monitoring market trends to time ELSS redemptions strategically, capturing opportunities and optimizing returns. |
| Goal Aligned Exit | Aligns ELSS redemption with financial goals like buying a house or car, ensuring investments contribute to life objectives. |
| Systematic Withdrawal Exit | Allows regular redemption of a predetermined investment amount, navigating the mandatory lock-in period of ELSS funds. |
| Partial Exit | Provides liquidity for immediate financial needs by allowing withdrawal of a portion of the capital income, keeping the rest intact for the lock-in period. |
Tactical Exit
To realise the full potential of your ELSS investments, you must adopt a dynamic tactical exit strategy. You seize opportunities and determine the best times to redeem your ELSS investments by remaining laser-focused on the ever-changing financial landscape.
Goal Aligned Exit
Crafting a savvy financial strategy involves syncing your life objectives with the perfect moment to redeem your ELSS investments. This approach helps you enjoy the perks of tax deductions under Section 80C and also plays a pivotal role in propelling you towards your financial milestones with substantial impact.
Systematic Withdrawal Exit
ELSS funds come with a mandatory lock-in period, restricting immediate withdrawals. However, the systematic withdrawal exit strategy allows you to navigate this limitation. You can regularly redeem a predetermined investment amount by opting for systematic withdrawals. This way, you remain invested in the fund while steadily realising some of your gains.
Partial Exit
Life is unpredictable, and there may be instances where immediate financial needs arise. The partial exit strategy caters to such situations. Investors can opt for partial redemptions in case of an urgent fund requirement. This allows you to withdraw a portion of your capital income while keeping the remaining amount intact for maturing over the lock-in period.
To Wrap Up
The journey of ELSS investments involves choosing the right funds and strategically planning your exit. Utilising an ELSS calculator can be immensely helpful. You can estimate the future value of your ELSS investments by inputting relevant details such as investment amount, tenure, and expected returns.
Remember, the key is to stay informed, monitor market conditions, and tailor your exit strategy to align with your financial aspirations. Doing so lets you make the most of your ELSS investments and secure a brighter financial future.