Hello Readers!

Redemption of Mutual Fund simply means exiting your Mutual Fund.

The right time to redeem your funds is a very important decision to make and this is based on several factors. Before redeeming you must go through detailed research and analysis about the performance of your funds. There is no point in redeeming at the time your fund’s ROI (Return of Interest) is not at its best. It is seen that most of the time the decision of redemption is based on the emotional sentiments of an investor or as an action in response to the underperforming funds. However, the wise decision is to wait because the market is bound to fluctuate and even an uncertain market can give you good returns if patience kept.

It takes a minimum of three working days to transfer your funds into a bank account. 

Through this blog, we are trying our best to explain to you, about every point detail, related to the redemption of a mutual fund.

Why do Investors need to Redeem their Fund?

Let’s first understand why investors redeem their Fund. There can be various reasons to an investor, for redeeming their funds. Below I am a briefing, some possible reasons, to the investor for redeeming their fund:

  1. When the Investor Investment Objective Gets Completed: Most people start their investment with a specific goal (either short-term goal or long-term goal), so that they can accumulate a corpus, to achieve their goal, or complete their objective. When investors feel that, they have accumulated enough corpus for their goal, they may sell or exit their mutual funds, and receive a reasonable profit from their investment.
  2. When Scheme Underperforms, Since A Long Time: When investors scheme, underperforms for a long time, they should look out for the reasons, behind the underperformance of their mutual fund. Financial advisors do advise, if your fund is underperforming due to change in the fund manager or a drastic change to the portfolio mix, Investors may consider redeeming their mutual funds, or they can also transfer their investment to another good performing fund.
  3. When the Market Is High: Investors do often sell their mutual funds, when the market performs high, even before the maturity period of their fund, to get a good amount of profit. Well, it’s good to redeem your fund when the market is high, but professionals say redeeming immediately after a new market high might be a flawed strategy.
  4. When AMC (Asset Management Company) cannot deliver what it promised: Investors start their investment with a specific goal, and their investment is planned in such a way, that it aims to reach the investment goal. When the investor realizes, that their investment portfolio in the long-run, is negative returns, and is unable to stand for their goals, they may redeem or sell their fund.
  5. Unexpected Financial Crisis: Sometimes investors, might face a situation, where they fall in an immediate need of a heavy amount of money. Most of the investors in this situation prefer to sell their mutual funds and fulfill their immediate need for money. The selling price of the funds, in this situation, is decided based on the current market value of the asset.

When to Redeem or Sell Your Mutual Funds?

When it comes to the right time to sell or redeem a mutual fund, the very first thing analyzed is, the investor's financial goal requirement is completed or not? Every investor, prior motive to invest in a mutual fund is to accumulate a corpus for their future goals.

Some people invest in the mutual fund for the long-term, like up to 15-20 years, with financial goals like building a house, after retirement expenses, child’s wedding and many more, whereas some people invest for short-term, with financial goals like buying a car, planning for a trip, and many more.

When the investor feels, that they are very much near to achieving their corpus, for their financial goal, they should have a regular check at the market performance, when it goes high, they may redeem their fund, and can a earn a good profit on their investment.

How to Redeem Your Mutual Fund?   

Well, you can redeem your mutual fund via both methods, online and offline. Here I am explaining the different ways or methods you can consider redeeming your mutual fund:

1. Offline Mode: Through an Agent or Distributor

If you have bought your units in mutual funds or invested in a mutual fund scheme, through an intermediate, that is an agent or broker, then you can redeem yours through the same. For that, you must fill a redemption form, given by your fund manager, don’t forget to mention the number of units you want to redeem. Submit the form, your redemption request will be processed. The redemption amount would be transferred to your bank account, mentioned in your portfolio, directly by the NEFT (National Electronic Funds Transfer).

2.Online Mode: Directly through AMC

If you have purchased your mutual fund units, directly through the AMC (Asset Management Company), then you can easily redeem your fund through the online portal or websites of these AMC’s. You can choose to sell some units or all as per your requirement.

You can also visit the AMC office and can register a request for the redemption of your fund.

3. Through registrar and transfer agency:

You can also go with the central services, like CAMS and Karvy, that offers the facility of redemption of mutual funds. You must download a redemption form and submit the duly filled and signed form at the nearest CAMS office.

4. Through a trading or Demat account:

If you have purchased your mutual funds unit through a Demat account, you will have to redeem your unit through the same. For this, you will have to fill up a physical form to sell your units given by your broker. The investor can either ask the broker or directly go to the Demat Provider, for the redemption of their fund.

Steps to Offline Redemption of Mutual Fund:

  1. Get a Redemption Request Form, from AMC, your broker or fund manager, on any business day.
  2. Fill the necessary details like the unit holder’s name, name of mutual fund scheme, folio number, plan details, etc.
  3. Don’t forget to mention, the number of mutual fund units in your portfolio, that you wish to redeem.
  4. Once the form is filled, you will have to sign it and submit it to the designated office of the Registrar or the asset management company (AMC).
  5. You are done! Your transaction will be processed.

Steps to Online Redemption of Mutual Fund:

  1. Visit the website of any AMC or Mutual Fund Company.
  2. Choose online transactions option on the website.
  3. Log in to the website with the help of your folio number and your Permanent Account Number (PAN), to get access to your mutual fund portfolio.
  4. In your portfolio, you will have to choose your scheme and select the number of units that you would like to redeem.
  5. After that, confirm your redemption.
  6. You are done! Your transaction will be processed.

As of now, you have understood, everything about the redemption of mutual fund units. Most importantly, always consult a financial advisor or planner, before taking any step in your mutual fund investment.

You can also contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).