How To Redeem Mutual Funds Easily?

By Advisorymandi
27-September-2018 11:48:00 AM
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A mutual fund is a best financial instrument to build wealth. However, if the fund is not performing well,
then you may decide to redeem them.
As a knowledgeable mutual fund investor, you remained consistent with your investments. You actively
tracked the market and managed the investments sincerely. However, due to an emergency, you
contemplated redeeming the mutual fund units. During the research about “how to sell of the mutual
funds”, you figured out that the decision to redeem the funds are based on many factors like:

 

  • Funds are performing consistently poor when compared with its benchmark.
  • Urgent requirement of the money to take care of an emergency situation.
  • The performance of a fund has reached its peak.
  • Opting for a different investment option.

 

What Exactly is a Mutual Fund Redemption?

It is basically a processing process when an investor decides to sell his investments in a particular fund. When you opt for the mutual fund redemption, then the money will be credited in your bank in 5-6 working days after the sell-off request has been made. It is important to note that many mutual funds have their own set of guidelines or rules entering and redeeming. So, it is imperative that the investors must consider these aspects in mind while selecting a fund.

 

Different Modes to Redeem Mutual Funds?

The process of redeeming the mutual funds is not rocket science. It is a very easy process. If you are clear in your mind that you have to sell off mutual funds, then it can be done on any business day.

Note: You must make a request for the mutual fund redemption before the transactions are closed by the financial markets. The money that will be redeemed will ultimately depend upon the Net Asset Value (NAV) of the fund for that specific day. NAV is a total value of a fund’s assets less its liabilities.

There are various modes through which a mutual fund investment can be made such as the Asset Management Companies (AMC), demat account, brokerage houses, online financial portals and so on. These channels can also be used for redeeming funds.

Redemption Directly Through AMC: If you have invested in mutual fund through an AMC, then you may have got the login credentials. All you are required to do is log in to the official website of the company by using the provided credentials and sell off the fund units you wish. It is entirely your choice whether you want to redeem the entire or partial units.

If time is not a constraint for you, then this process can also be completed by visiting the office an AMC.  Here, you will be required to perform certain steps, which are as follows:

 

  • Fill up a mutual fund redemption form and mention the units you want to redeem.
  • Submit the form to the company.
  • After your request has been processed, then in 4-5 days, the redemption amount will either be credited to your bank out or a cheque will be sent to your registered address.

Redemption Through a Demat Account: It is one of the best and easy methods to redeem the mutual funds. You have to log in to your demat account and sell the funds with just a simple click of a button. The amount will be transferred to your bank account registered with the demat account.

Brokerage Houses: If the mutual funds have been purchased through the brokerage houses, then certain  steps have to be performed, which are:

 

  • Fill up a mutual fund redemption form and mention the units you want to redeem.
  • Provide your folio number when filling up a form.
  • Submit the form to the broker.
  • Your application will be processed by the brokerage house and the payout will be made accordingly.

Online Portals: The redemption request can also be placed through the portals through which the mutual funds have been purchased. You just have to log in to the website or portal by using the credentials. In just a few clicks, your redemption application will be processed and the money will be credited in your bank account in a few days.

IMPORTANT POINT TO REMEMBER: After the request for the redemption is processed, then it cannot be canceled anytime.

 

How Much Money will You Get After Mutual Funds Redemption?

 

The approximate amount that you will make depends upon a very simple calculation. All you are required is to multiply the mutual fund units you wish to redeem with the NAV of the particular day. The amount that you will get also depends upon several prominent factors which are as follows:

 

  • Exit Load: If you wish to redeem the funds within the specified period, then you will be required to pay an exit load charge. For instance, if the units are sold within one year, then it may attract an exit load tax of 1%. It is to be noted that the charge may vary from one scheme to another.
  • NAV: The NAV of a particular day on which the redemption application was made. A very important thing to take care of is that during the redemption, the NAV of a particular day is only applicable till 3 pm. If a redemption application is made after 3 pm, then the NAV if the next day will be considered.
  • Lock-in Period Funds: If you have invested in the close or open-ended schemes, then they can be redeemed any business day. However, if you invested in the Equity Linked Savings Scheme (ELSS), then it comes with a lock-in period of 3 years and can only be redeemed after the completion of the specified time period.
  • Taxation: If you keep the mutual fund for more than one year, then it will not attract any taxes. However, if you wish to redeem it before the specified period, then certain taxes such as the long-term capital gains tax, surcharge and education cess will be levied.

 Conclusion

Mutual funds are no doubt one of the excellent means to multiply your income and meet your long-term financial goals. Make sure that you have a suitable reason to sell off mutual funds. It is important that you must take consult your financial advisor before redeeming mutual funds.

 

Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.

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Author: Advisorymandi

AdvisoryMandi is India's most trusted Stock Market Advisory marketplace covers NSE, BSE, MCX & NCDEX. Invest with confidence and harness the power of AdvisoryMandi to make smarter investment decisions in Stocks, Indices, Commodities, Forex & IPO.

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