Is My Money Locked In SIP?

New Investors who recently started or are planning to start their SIP in Mutual Funds have this question in their mind “Is my money locked in SIP?”

Today I would take this opportunity to answer this question to all of those who may have this doubt so they can start investing in mutual funds.

What Is Lock-In?

Before answering this question you must understand what is a lock-in when it comes to investing.

Lock-in means there are certain conditions or restrictions on redemption, premature, or withdrawal of any investment you are doing. In other words, you can’t liquidate your investments until such conditions are met or fulfilled.

Is My Money Locked In SIP?

No, there is No Lock-In In SIP.

SIP is a systematic investment plan in which you regularly invest your money in a mutual fund scheme. In the Open-Ended Mutual Fund Scheme there is No Lock-In which means you can invest and withdraw anytime. Let’s know more details about SIP and Lock-In in SIP.

1. SIP gives High Flexibility

SIP is a method of investing in a mutual fund scheme so it provides high flexibility to start, stop, increase, decrease, or change the date of your SIP.

2. There is No Lock-In in SIP

In SIP your Money is invested in a mutual fund scheme (be it equity or debt) they don’t have any kind of lock-in in any open-ended fund (except ELSS, Solution Oriented Funds) so the money is not locked in SIP.

3. You can Stop SIP & Redeem Anytime

As discussed above, there is no lock-in in any open-ended mutual fund (except ELSS, Solution Oriented Funds) so you can Stop SIP and redeem your money anytime.

4. Unlike Insurance No Concept of Surrender Value

Most compare SIP with Insurance, so unlike Insurance in Mutual Funds there is no concept of Surrender Value. You get all your current value (latest fund value) after the deduction of exit loads (if applicable). Exit loads are applicable on fund value and in equity Mutual Funds they range up to 1% only if redeemed before 365 days from the date of investment. Whereas in Insurance, the surrender charges may range up to 75% of your investment.

5. Lock-In for ELSS & Solutions Oriented Funds

ELSS is Equity Linked Saving Schemes also known as Tax Saver Funds are an open-ended scheme with a 3-year lock-in. ELSS provides deduction under section 80C of Income Tax and has a 3-Year Lock-In from the date of investment, so SIP in these funds can be stopped, but the redemption of investment value can only be done if 3 years are completed (per transaction basis).

Solutions Oriented Funds are based on various life solutions such as Retirement Funds or Children’s Funds to fulfill particular financial goals for their investors.

These funds have a minimum lock-in of 5 Years or a Retirement age of 60 (in case of Retirement Fund) & 5 Years or a Child attaining age of 18 (in case of Children’s Fund) whichever is earlier.

Conclusion

There is no lock-in on your money invested through SIP in Mutual Funds. You can increase, decrease, stop, redeem do anything with your SIP. This is the important benefit that keeps SIPs far above all other investment products currently available.

If you have any other queries related to mutual funds, then you can click here to schedule a 1:1 discussion with me.

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