You must not redeem your units immediately after the lock-in period expires as an investor. A thorough review is important before deciding whether to redeem or not.
1. Review the Fund or Investment Performance
Once the period of 3 years is over, you must review your investments. For example, ELSS funds offer both tax benefits and long-term capital appreciation. However, most investors mistake using it just as a tax-saving tool. Therefore, they transfer the money to invest in another ELSS fund.
These multi-cap funds invest in equity which does not grow to the fullest within 3 years. You must stay invested in the fund for a minimum of 5 to 7 years for maximum realisation of returns.
2. Decide Whether to Stay Invested or Not
You can decide to continue your investment as an open-ended fund after the expiry of the lock-in period of mutual funds. Besides, you can transfer the money to any other scheme that matches your investment objectives.
However, you must only continue if the fund’s performance aligns with your investment objectives. If the performance review does not align with your goals, it is better to redeem and invest newly.
3. Redeem the Units of Your Investment
You must not consider the lock-in period as your investment tenure and exit the fund after it is over. It is wise to redeem only in the case of genuine requirements such as a medical emergency.
There is an option to redeem the units as a whole or lump sum as the fund becomes open-ended. Therefore, you can redeem only a portion of your investment instead of completely exiting it.
So, to sum it up, the lock-in period restricts you from selling your investment to gain long-term investment benefits. It is not your investment tenure, but a simple restriction to preserve the fund’s liquidity and increase stability. Thus, you have no obligation to redeem the units after the lock-up period expires. However, you should only remain invested if their performance aligns with your financial goals.