Know what is trigger facility in mutual funds

The trigger facility enables investors to book profit automatically at a pre-defined time or value

October 28, 2013 9:36 IST | India Infoline News Service
The trigger option provided by various asset management companies (AMCs) ensures that investors are able to complete the sale or redemption of their mutual fund units smoothly and without any disruption.

The trigger facility helps investors not to miss an opportunity and make the most of market movements without the hassle of constant tracking.

The below article provides some details about what is a trigger facility, types of triggers and how investors can apply for the trigger facility.
Asset management companies have introduced the option of triggers in their mutual funds. In trigger facility, you can define a specific event, which may be related to time or value, in advance and when this event takes place the trigger is activated. Thus, this facility enables you to keep track of your investments without having to put in time and effort to track portfolio movements on a regular basis. It also helps you maintain a disciplined investment approach that ensures that you meet your investment goals.

The trigger facility enables investors to book profit automatically at a pre-defined time or value. Thus, an AMC declares a dividend, redeems and/or switches the units automatically on behalf of the investor on the date of the event.

A unit holder may opt for this facility at any time by submitting a written application. You may exit the trigger facility or specify new terms, while you are invested in the scheme. You just need to write a letter requesting cancellation of the facility. The letter should include details such as folio no, name of the scheme, the transaction for which the trigger is to be cancelled, amount etc.

Types of triggers
  • Value trigger: Redemption/switch is triggered when the investment reaches a value defined by you.
  • Nav-based trigger: Comes into effect when the NAV hits a certain value or changes by a specified percentage.
  • Date trigger: Redemption/switch occurs on a date specified by you.
  • Capital gains trigger: Comes into effect when there is capital appreciation of a certain percentage or amount.
  • Reinvesting gains: Allows one to redeem or reinvest when the requisite period for realisation of long-term capital gains is reached.
  • Downside trigger: It's based on a stop loss concept, where one can specify the value or percentage that is lower than the investment amount.
  • Index-based trigger: Comes into play when the BSE/NSE rises by specific points or hits a certain level.

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