The exit from mutual fund investments is called mutual fund redemption. You can sell your fund units on any given business day, subject to lock-in periods if any. In this post, I will share information about how to exit and redeem mutual funds.
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Mutual Fund Redemption
Mutual fund redemption is a process in which an investor sells his/her units of a fund scheme. In this process, the investor gets the money back from his/her investment at the NAV prevailing on that day.
The process of redemption is very simple and easy depending on the type of fund you hold. When you redeem mutual fund investments, you will receive funds in your account within 1 to 5 working days.
Reasons for Mutual Fund Redemption
The following could be specific reasons to redeem mutual fund units.
1. Completion of investment goals: The ultimate purpose of mutual fund investing is to achieve your financial goals. If you have received your targeted return then you may exit from your investments.
2. Poor performance of the fund: You may think to redeem your funds if your fund underperforms consistently while its benchmark and peer funds are doing better.
3. Unexpected financial emergency: You may consider redeeming your funds due to an unexpected financial crisis like a job loss, medical expenses, etc.
4. Changes in the scheme: You may also consider redeeming your funds if the AMC changes the scheme. And the employed changes are not congruent with your investment objectives.
5. Rebalancing of your portfolio: With time, your priorities, goals, and objectives change. To rebalance your portfolio, you need to sell those funds which have become irrelevant.
How to redeem mutual funds?
Fund units can be redeemed on any given business day through a convenient method. You can redeem the fund units either through an online or offline method.
How to redeem mutual fund units offline?
In the offline mode, you need to file a redemption request by submitting the duly signed redemption form to the fund distributor. You can also submit your redemption form at the office of the concerned Asset Management Company (AMC) or Registrar & Transfer Agent (RTA).
How to redeem mutual funds online?
Most of the fund houses also allow redemption of mutual funds via online mode. In the online mode, you need to visit the official website of the concerned AMC and RTAs. If you have invested using an online portal then you can redeem using the online mode. Please note that the online mode of redemption is much easier and faster.
Ways to Redeem Mutual Fund Units
You can redeem your fund units through any of the following ways:
1. Directly through AMC
2. Redemption via Online Portal
3. Offline through an agent or a distributor
4. Through a Demat and Trading account
5. Through RTAs (Registrar and Transfer Agencies)
How long does it take to receive the fund redemption amount?
When you redeem your fund units, it will typically take 1 to 5 working days to receive the fund redemption amount.
When you redeem a debt fund or a liquid fund, you will get the money within 1 to 2 working days. For equity funds, you will get the money within 4 to 5 working days.
The money will get credited to your registered bank account if your bank branch is enabled for RTGS / NEFT. If the concerned fund house does not have your bank details then the cheque will be sent to your registered address.
Exit or load charges on Redemption of Mutual Funds
Generally, the equity funds have an exit load of 1 percent if redeemed within a year of purchase. The liquid or ultra-short term funds do not have any exit load.
Therefore, the exit charges vary from scheme to scheme. The exit load will be deducted from the NAV for the redemption of each fund unit.
Final Thoughts
You can exit and redeem mutual funds very easily using any of the methods mentioned above. However, you must ensure that you are redeeming your fund units for an appropriate reason. Along with this, you also need to take the tax aspects and exit charges into account and then make a decision accordingly.
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