All of us prefer different financial instruments to for our savings or invest in something that increases our wealth. After a certain period, we may want to withdraw the money invested for some emergency or various other purposes. Every financial vehicle has its own distinct method to redeem the savings.
Mutual fund is one of the popular methods of investment that offers high returns in the long-term. If you have invested in a mutual fund, you might want to know how to redeem the amount invested at a certain point of time. Moreover, it is also vital to have substantial knowledge about when you can redeem your funds and when not to do it.
How to redeem your mutual fund investments?
The investors can invest in mutual funds through various channels such as Asset Management Companies (AMCs), dematerialized account or DEMAT account, brokerage houses and online financial portals. The redemption can also be done through the same channels.
Through AMC: You may have purchased a mutual fund through an Asset Management Company where they would have provided you with a login credentials. You can login to their official website using the username and password provided and redeem the units you wish. You can either redeem the entire units or a specific limit of units and the balance will still be remaining and perform accordingly in the future.
You can also directly visit the AMC where you have invested and fill in the form and submit to the company. It might take 2 to 4 working days for the proceeds to be deposited into your bank account depending on the scheme you have invested.
Short-term debt or liquid funds can be redeemed within 2 days while equity and long-term funds will take up to 5 days for redemption.
Demat Account: This is one of the popular and convenient methods of managing your mutual funds. You can just login to your Demat account and purchase new funds or redeem the existing funds in a click of a button. The pay-out is made directly into the corresponding bank account registered with the Demat account.
Brokerage Houses: If you have purchased funds through a brokerage house, you may have to visit the office and fill out the redemption form with the details of your folio number and units you wish to redeem. After you have submitted the form, the broker will process your application and the pay-out will be made to your bank account.
Online Portals: There are various online portals where you may have bought the funds. You can login using the credentials and place a redemption request following which it will be processed, and the pay-out is made.
Things to keep in mind for before redeeming your mutual fund
Timing the market: The longer you hold, greater the returns you will get from mutual fund investments. If you have taken a closed end mutual funds, you may not be able to redeem before the date of maturity. In case you have opted for open ended funds, you can redeem it anytime you like, and it is important to calculate the returns when you withdraw before the maturity date. A mutual fund may not always perform well, but if held for a longer period, it assures you capital protection and appreciation.
Exit Load and Expense Ratio: Every mutual fund attracts a certain amount of expense ratio and exit load of 1% if redeemed within a specific period. Calculate the outgo on such categories and redeem when it is beneficial for you the most.
NAV: Net Asset Value(NAV) of the fund is declared only at the end of trade closing of the day. Hence if the redemption request is placed before 3pm, the NAV of the same business day is applicable. If the request is placed after that, NAV of the next day will be applicable at the redemption.
Taxation: If a mutual fund is held more than a year, it will not be taxable while the short-term funds are taxable. Hence, you must consider this before redemption if your fund attracts tax or exempted.
Mutual fund is a good instrument for multiplying your investment provided if it is approached with a long-term perspective and it could well turn out to be a perfect investment for your retirement plan and children’s higher education. Keeping all this in mind, you should make a wise decision while redeeming your mutual funds.