Why you should never invest in ELSS , Dividend Reinvestment Scheme !

Why you should never invest in ELSS , Dividend Reinvestment Scheme !

Why you should never invest in ELSS , Dividend Reinvestment Scheme, Section 80C, Mutual Fund Investment, Tax Saving Planning.

Equity Linked Savings Scheme (ELSS) is an instrument which many investors use to get advantage in Section 80C, Rs 1 Lac, deduction in Income.

There is a 3 year lock in in these schemes.

If you choose the Dividend reinvestment Scheme, then the reinvested portion gets locked again for 3 years from the date of dividend.

Even if the schemes declare dividends once every three years , part of your investments can be locked in for ever.

Options:

1.  Do not opt for Dividend Reinvestment Scheme in case of ELSS

2. In case you already have invested in such an option in ELSS , then change the option to Dividend Payout. (This is provided you are lucky that the dividend has not yet been declared) (Pls note that Fund House will not allow you to change to Growth)

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Comment (1)

  • Smart Singh

    I think this is a very easy-to-understand point which many investors completely miss out.
    Also, people usually don’t understand the value of liquidity.

    December 21, 2010 at 7:13 PM

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