Why should you never opt for dividend reinvestment in ELSS funds?

ELSS Mutual Funds are meant for the purpose of tax saving. They have a lock in period of 3 years. So you can't redeem the amount for a period of three years from the date of investment. Dividend reinvestment is also considered as a fresh investment in the fund. Every dividend amount that is invested back into a fund is redeemable only after three years in the case of ELSS.
Suppose if you have invested some amount in DSP Blackrock Tax Saver Fund in 2010, you can redeem those initial units purchased after 3 years. The dividend reinvested in 2011 would be available only in 2014. Even after you redeem your initial units the dividend reinvested will give dividends in 2013 and are reinvested again to make available to redeem only in 2016. This continues to infinity. You would never be able to redeem your entire investment if you opt for dividend reinvestment in case of ELSS funds.

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