A common worry of many mutual fund investors is how to redeem money after achieving a certain financial goal. Redemption is nothing but a process of withdrawing units from a mutual fund scheme and getting the money back from your investment at the net asset value prevailing on that day.
An investor can redeem the fund units either online or offline. Through online, they can visit the registered website of the concerned Asset Management Company and when it comes to offline, they can file a redemption request by submitting the Redemption Request Form.
Here’s all you need to know while withdrawing/redeeming your units after the accomplishment of a financial goal.
One of the primary benefits of investing in mutual funds is the liquidity element that this savings/investment vehicle provides. At the time of withdrawing units from a mutual fund, the amount which an investor wants to get back in his/her bank account, also known as redemption proceed, directly goes into his/her registered bank account within 3-4 business/working days.
Ajit Narasimhan, Chief Marketing Officer, Sundaram Mutual Funds said that the time it takes to get the credit after redemptions typically depend on the category of mutual fund. “For example, Redemption proceeds for liquid or low duration fund or other debt funds are usually paid within one working day. The MF industry also offers “instant redemption” funds in the liquid category where your money is credited via IMPS instantly into your bank account. However, there’s a cap with such redemptions of Rs 50000 or 90% of the value of the investor’s holding whichever is lower. For equity mutual funds, the investments are credited to investors within 3 working days,” he explained.
Ways of making redemption
Investors can use both online and offline mode to redeem their investments. To redeem offline, the investor has to submit duly signed redemption form with all relevant details, including Folio No, scheme name, plan details, etc to his mutual fund distributor. Alternatively, he can also submit redemption form directly at the office of the concerned AMC or Registrar & Transfer Agent (RTA).
Manish Kothari – Director, Head of Mutual Funds, Paisabazaar.com said that online redemption is much easier and faster. All that an investor has to do is log in to his online mutual fund account, press the redemption button and confirm the transaction. Redemption amount will be credited to his bank account within turn-around time. Investors can visit the websites of mutual fund houses and RTAs to redeem their funds online. Those having invested offline too can redeem funds through online fund house and RTA websites. “Note that Exchange Traded Funds (ETFs) can be only be redeemed through the trading accounts provided by stockbroking firms," he added.
In many cases, you may not have to pay any charge but in certain situations, the investors may have to pay an exit load or certain charges while withdrawing the unit.
Narasimhan said mutual funds may have an exit load if redeemed before a given period. For example, A scheme may charge an exit load of 1 per cent if redeemed before a year from purchase. At the same time, there are some schemes such as liquid funds or ultra short-term funds, which do not have an exit load. “In cases of funds with an exit load, the exit load will be deducted from the NAV which is applied for your redemption per unit,” he said.
Disclaimer: The views and investment tips expressed by investment experts are their own and not that of the website or its management. Users are advised to check with certified experts before taking any investment decisions. Source: Moneycontrol.com