We're all set for a new experience. To visit the old Ventura website, click here.
Ventura Wealth Clients

Help topics

What is lock-in period in mutual fund investment?

The lock-in period is an important concept for those investing in mutual funds. This period represents the minimum amount of time an investor must stay invested in a mutual fund. A lock-in period usually plays its role in instruments like Equity Linked Savings Schemes (ELSS) or retirement funds. During this tenure, investors cannot sell their units, either offline or through an online trading platform. This builds stability in the fund and aligns with the long-term investment goals.

Importance of Lock-In Period

A lock-in period instils discipline in investors, encouraging them to invest for a longer period of time. Moreover, since the amount is locked in, the fund can offer better returns. It discourages impulsive investment decisions based on short-term market movements. 

In the context of ELSS and retirement funds, the lock-in period serves the dual purpose of tax benefits and sustained growth, enabling a strategic approach to wealth creation. Over the longer run, this period contributes to a more stable and rewarding journey in investments.

What Should I Do After the Lock-In Period Expires?

As the lock-in period for mutual funds ends, investors are flexible to make decisions on their online trading platform. Post-expiry, individuals should evaluate their financial goals, market conditions, and the performance of the fund. Investors can continue the investment, explore alternative funds, or consider settling. This decision is driven by personal needs. This phase allows investors to reassess their portfolio, ensuring it aligns with current objectives and market dynamics.

Different Investments in Lock-In Period

The lock-in period isn't a one-size-fits-all concept. It is different for each instrument and thus, the implications vary accordingly. For example, an ELSS fund usually has a 3-year lock-in period while a retirement fund would have a longer tenure. Understanding these distinctions is important for investors on an online trading platform, as it influences their financial planning strategies. Tailoring investment decisions to the specific lock-in period of each fund ensures a more nuanced and strategic approach to wealth management.

Related articles