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Mutual Fund Redemption – Steps on How to Redeem Mutual Funds

Mutual funds redemption is the procedure of withdrawal of mutual funds units by an investor. There are many situations when an investor redeems mutual funds such as at the time of meeting their financial goals when a fund has hit a new high, etc. Read further to know how you can redeem mutual fund units.

Getting started with Mutual Fund Redemption

For instance, you began investing in mutual funds two years ago to save for an abroad trip. The duration is nearing completion. You are going to achieve your goal. All you must do now is withdraw the units to get the returns. Now you may be wondering, how to withdraw it, and what is mutual fund redemption process?

When you want to redeem mutual fund units, the fund house will sell the shares purchased during the time of investment. The mutual fund redemption process is selling the shares to garner the returns. Mutual funds redemption relies on different factors. One of them is the type of mutual fund an investor holds. However, there are other factors that you need to know about your investment before you redeem mutual fund. The money will be credited by the mutual fund company when the investor submits the redemption request form.

Investors have a hard time deciding which mutual fund is better for them. They have questions such as how long to invest in it, how much return one can expect, and the time it will take for them to redeem the funds.

When you meet a financial goal that you were eyeing for years, you are excited to redeem it. However, the process of withdrawing funds can seem challenging, but it's not.

Factors of Mutual Fund Redemption

Here are some factors you need to remember when you are redeeming units from your mutual funds-

  • Every mutual fund type has its own guidelines for redemption

  • The redemption time for a liquid or debt fund is one working day

  • Equity mutual funds take up to 3 working days for the redemption

  • There are instant redemption funds too. However, you can only redeem only 90% of the investment or Rs. 50,000, whichever amount is higher

  • Take into account the time you need to stay invested to achieve your financial goal

One has to withdraw units at the right time so that your investment goal is met. Timing of mutual funds redemption is crucial, or you might miss the investment objective. Detailed research on types of mutual funds, their returns, the redemption time, etc. must be done. Also, consider when you want to redeem the mutual fund units. It may be for a long-term pursuit of purchasing a home or a short-term objective of buying a car.

Ways you can Redeem Mutual Funds

Now that you know what you need to keep in mind about mutual funds redemption, here are ways you can redeem them-

  • Asset Management Companies (AMC)

    You can redeem the mutual fund units online if you have invested with an asset management company (AMC). The AMCs also offer offline redemption of units. You can do it visiting the office of the AMC. The redemption amount will be credited via NEFT, or you will receive a cheque to your address. However, online mutual fund redemption takes fewer efforts.

  • Distributor or an Agent

    The redemption process can be done with a central service too. You can visit the office and submit the redemption form with all the details.

  • DEMAT or Trading Account

    You will have to redeem the units with your DEMAT account if you have purchased mutual funds with that account. The redemption will be made via NEFT or IMPS. The redemption amount will directly reflect in your bank account, which linked to your DEMAT account.

  • Transfer Agency or Registrar

    You will have to visit the office of a central service such as CAMS, Karvy, etc. and submit the redemption form with all the details.

When to Redeem Mutual Funds

There can be two scenarios that compel investors to redeem the units such as-

  • When the funds are performing badly

  • When the market is high, and you want to sell the units to get high returns

However, you may get higher profits if you stay invested till you meet your financial goal and not withdraw it before due to any situation. You may receive benefits when you withdraw before achieving your goal but staying put in the investment can secure you financially in the long run.