What is Mutual Fund Redemption


What’s mutual fund redemption?

You will receive mutual fund units from the mutual fund AMC against your invested amount. The investor can redeem the units and receive his invested amount back. The amount that the investor receives will depend on how the fund performed and whether the units have appreciated or declined in value.

How do I redeem mutual funds?

Investors have 4 options to redeem mutual funds

Direct AMC Redemption

This is the direct redemption of an amount invested by the AMC. This is possible if the investor has directly invested into the mutual fund that the AMC has floated. The AMC online portal allows investors to redeem units or visit the AMC office.

The amount is credited to the bank account or sent as a cheque to the registered address of the investor.

Redemption of Demat Accounts

A demat account can be used for mutual fund purchases and can also be used to redeem. After the redemption request has been made, electronic payouts are initiated and credited to the registered bank account.

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Agents and Distributors

AMFI distributors and agents can also assist with redemptions. Many of them also have their own investment platforms that offer redemption options.

Click on the redeem button on Holding screen to choose whether you want to redeem Unit Quantity or Value. Investor will receive an OTP via SMS and email to confirm the order once it is placed from the platform.

Transfer Agency Redemption

Investors may also redeem their investments through central agencies such as CAMS. You will need to download, complete, sign, and submit the redemption form to any agency.

What is Insta redemption?

Liquid funds offer this service to their investors in order to provide liquidity. Distributors like Investica offer instant credit up to Rs.50,000 for liquid funds. This is known as insta redemption. In this instance, your mutual fund account doubles as a savings account.

What is the time required to redeem mutual funds

Insta-redemption is instantaneous, but only for liquids funds investments. It is available up to Rs.50,000. This is only available to a handful of mutual funds, Aditya Birla Sunlife Liquid Fund Development being one.

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Redeem Equity Funds in T+3 Days. In the case of Debt funds, it will take T+1 Day. T is for transaction date (working days).

Distributor to distributor, the redemption period can differ.

What are the charges for redemption?

Redeeming your tickets can be associated with 3 types of charges:

  • Get out of the Load
  • NAV
  • STT – Securities Transactions Tax

NAV and STT must be met, but exit load can vary depending on the fund type. If the exit load is not repaid within one year, equity mutual funds typically charge 1%.

ELSS funds are subject to a 3 year mandatory lock-in before you can withdraw. Because the time horizon for liquid and ultra-short term funds is very short (3 months to 1 year), exit loads are not applicable.

What are the reasons for an investor withdrawing or redeeming?

  • The fund’s performance has not been satisfactory.
  • Redemption depends on the investor’s goals. If the amount required to achieve the goal is reached, the investor may opt for redemption.
  • Investors may be faced with unexpected financial crises. Open-ended funds are a good option for portfolio diversification, as they provide liquidity.
  • When the market is strong, investors would love to be able to book profits
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