I have invested in Axis Long Term Equity - growth option. Can I change to dividend option before the lock-in period is over?
- Bhaskar Aglave
Axis Long Term Equity is an Equity Linked Savings Scheme (ELSS) or tax saving mutual fund scheme. Investments in ELSS qualify for a tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. All tax saving investments have a mandatory lock-in period. ELSS also has a mandatory lock-in period of three years. Switching from growth to dividend plan (or vice-versa) involves a redemption from the existing scheme and a fresh purchase in the desired plan. This is because the growth and dividend plans have different NAVs. If you haven't completed the mandatory lock-in period, you would not be able to switch to the dividend plan.
Also, a general advice on the dividend option. Unless you really need money from your investments periodically, do not opt for the dividend option. A dividend is nothing but taking profit from your investment. The mutual fund's NAV always fall after a dividend pay out. If you want to grow your money over a long period, it is better to stick to the growth option. You can always sell a part of your investment (after the lock-in period in this case) if you actually need the money.
This article was originally published on December 16, 2015.
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