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Finance

Understanding what is mutual fund redemption and how to redeem

Mutual fund redemption is when investors want to sell their mutual fund units or holdings. If there is an exit load, investors need to pay it upon redeeming their units. As a result, they receive taxable capital gains when they redeem their units. Capital gains are taxed differently depending on the type of fund and the duration for which the amount was invested. Therefore, investors must evaluate all the costs associated with redeeming their mutual fund investments.

Online mutual fund redemption process

You, as an investor, have the option to either specify the units you want to redeem, the amount you want redeem, or if you want to redeem your entire investment in that mutual fund scheme. One way to redeem mutual funds is through an online process. You can visit the mutual fund’s official website.

  • Select online transactions
  • You will need to log in to the website using your folio number and your Permanent Account Number to access your mutual fund
  • The next step is to choose your plan and the number of units/amount you want to redeem
  • After that, you can confirm your transaction and complete the process

What are the other options to redeem mutual fund units?

You can redeem your mutual fund units using any of the ways listed below if the cause for redemption is clear and finalised.

  • Directly through your AMC: You could redeem your mutual fund using the asset management company’s (AMC) website if you invested directly with the AMC. Units can also be redeemed in person at the AMC office. You will get the amount by NEFT or a cheque delivered to the registered address once your request is processed.
  • Using a trading or depository account: If you purchased mutual funds using a demat account or a trading account, you can redeem your units using the same account. Following the completion of the procedure, an electronic payout (NEFT or IMPS) will be initiated in response to the redemption request. The funds will be sent to the same bank account to which your demat account is linked.
  • Offline via a distributor or an agency: Mutual funds purchased from several AMCs can also be redeemed through central systems. Download a redemption form and return it to the nearest CAMS office, filled out and signed.

When is the right time to opt for mutual fund redemption?

Investing in mutual funds can help you to achieve financial goals; however, there could be certain conditions that might make you exit a scheme before it earns attractive returns for you. A few of these conditions could be personal, wherein selling your mutual funds units is a wise call.

For conditions that solely depend on the market situation and the performance of the fund, it is likely that some professional guidance could go a long way in making your investment work well for you. This is where financial advisors step in with bespoke investment plans and timely alerts to aid your goal of short term or long term wealth creation, while taking into account your risk appetite.