Learn everything about mutual fund redemption, including the process, timelines, and key things to consider before withdrawing your investment.
There are often times as an investor when you may need to encash or liquidate your holdings in mutual funds due to some personal financial emergency, or because you want to invest in better mutual fund schemes. Mutual fund redemption can be defined as the exit from a mutual fund scheme. You may do this in parts or specific units, or exit entirely. In this article, we will talk about the things surrounding mutual fund redemption that you should be aware of as an investor.
When you want to sell a stock, you need to find a buyer. A stock gets sold at a price that is mutually agreed upon. Therefore, it is important to find a buyer who would agree to buy the stocks at your desired prices.
However, it is different when it comes to mutual funds. The buyer in this scenario is the mutual fund house itself. The corresponding unit is bought at the current NAV or Net Asset Value of the mutual fund unit, and takes between 3-4 days for the fund house to credit the amount in your account.
This type of redemption allows you to specify the number of units you want to redeem.
This type of redemption allows you to specify the amount you want to redeem.
You can redeem an entire investment with this type of redemption.
Most mutual fund schemes expect you as an investor to invest beyond one year. If you wish to exit the fund before this period of time, there would be a certain penalty levied, known as the exit load. Exit loads are generally about 1% of the total amount you are withdrawing.
If you had bought mutual fund units from a trading or demat account through a broker, you would have to raise a sell order through the same broker. The corresponding amount will be credited to the bank account linked with your demat account.
Most people buy mutual funds from AMCs or mutual fund houses directly, or through platforms such as the Bajaj Finserv Mutual Fund Platform. All such platforms come with an online platform where you can buy, sell, and monitor your mutual funds.
RTAs are known for maintaining records and transactions on behalf of mutual fund houses. You can also redeem your fund units via RTAs.
A temporary market flux cannot be the reason why you redeem your mutual fund units. This is particularly true if you have a long term investment horizon, because markets are eventually stablised. However, if your fund has been underperforming consistently, you could consider redeeming your funds.
You might face a circumstance where you need to move your investment funds to an urgent capital-intensive expense such as a medical emergency or losing a job.
The strategy that a mutual fund house devises in terms of picking stocks from small, mid-cap or large funds and focusing on certain sectors should remain constant. However, these strategies may be changed by a fund house to capture the market in a more efficient manner or change their fund manager. In such circumstances, you may choose to redeem your fund units, if you feel that the changed investment strategy does not align with your financial goals any longer.
The primary goal of investing in mutual funds is to achieve certain goals. If you have been an investor for a long period of time and have achieved your goals and received your target return, you may choose to redeem your fund units.
Remember that while you do have the option to redeem your fund units, temporary market movements should not be the reason why. Whether you have achieved your goals or need liquid cash for an emergency, there are various ways of mutual fund redemption that you can choose from.
While looking at mutual fund options, consider checking the Bajaj Finserv Mutual Fund Platform to take a look at over 1,000 mutual funds. Here, you can access a mutual fund calculator that you may use to compare mutual funds and choose what is best for you.
Yes, there is usually a 1% exit load on mutual fund unit redemptions.
Consistent underperformance of a mutual fund is when the fund is delivering a negative α consistently.
The amount is determined by the number of units you wish to redeem, and the current NAV of the said mutual fund unit.
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