One of the biggest advantages in a Mutual Fund scheme is Liquidity, i.e. ease of converting investment into cash.
Equity Linked Savings Schemes (ELSS), which offer tax benefits under Sec 80C, are required by regulation to ‘lock-in’ units for a period of 3 years, after which, they are free to be redeemed.
There is another category of schemes popularly called as “Fixed Maturity Plans” (FMP’s) where investors need to stay invested for a stipulated period which is pre-defined in the offer document of the scheme. These schemes have an investment duration of anywhere between three months to a few years.
A few open end schemes may however, specify an exit load period. For instance, a scheme may specify that units redeemed with 6 months would attract an exit load of 0.50% at applicable NAV.
One should bear in mind that while there be may some rules and regulations on the minimum time horizon. So, it is best to take the advice of a financial expert to know the appropriate or ideal time horizons for every type of scheme.
