How to Redeem Mutual Funds

Redeeming mutual funds means selling your mutual fund units back to the fund house. Knowing when and how to redeem your mutual funds can help you manage your investments effectively. 

Whether you prefer online methods for their convenience or offline methods for their personal touch, this guide covers everything you need to know. 

Let’s explore the steps to redeem mutual funds online and offline and understand the right time to redeem your investments.

What is Mutual Fund Redemption?

Mutual fund redemption is simply the process of selling your mutual fund units back to the mutual fund company. When you invest in a mutual fund, you buy units of that fund. 

Over time, the value of these units can go up or down based on the performance of the investments made by the fund.

When you need money, you can redeem or sell these units to get cash. The amount of money you get depends on the current Net Asset Value (NAV) of the units. NAV is the price of one unit of the fund on a given day.

For example, if you have 100 units of a mutual fund and the NAV is ₹50 per unit, you will get ₹5,000 if you redeem all your units.

Redemption is a way to get back your investment along with any profits or losses. Some mutual funds may impose a small fee, known as an exit load if you redeem your units before a specified period.

When to Redeem Mutual Funds?

Knowing the right time to redeem your mutual funds is key to maximising your investments. Here are some common situations when you might consider redeeming your mutual funds.

First, redeem your mutual funds to meet your financial goals. If you invested in saving for a specific goal, like buying a house, funding education, or planning a vacation, redeem your funds when you reach that goal. This ensures your investment serves its purpose.

Second, consider portfolio rebalancing. Over time, the value of your investments might change, making your portfolio unbalanced. If one investment grows more than others, redeem some of it to keep your investment mix balanced and diversified.

Third, address poor fund performance. If your mutual fund is not performing well compared to similar funds or its benchmark, redeem your units and invest in a better-performing fund. This way, your money works efficiently for you.

Fourth, cover emergency needs. Sometimes, unexpected expenses arise, and you need urgent cash for emergencies like medical expenses or home repairs. Redeeming your mutual funds can be a quick way to get the money you need.

Lastly, consider tax planning. At the end of the financial year, redeeming some of your investments can help manage your tax liabilities effectively.

How to Redeem Mutual Funds Online

Redeeming mutual funds online is quick and convenient. Here’s a step-by-step guide to help you redeem your mutual funds online easily:

Step 1: Log in to Your Account

• Log in to your account where you hold your mutual funds. This could be your bank’s online portal, a mutual fund website, or an investment platform.
• Make your username and password ready.
• If you don’t have an online account yet, register and create one by following the registration process on the website or platform.

Step 2: Select the Mutual Fund to Redeem

• Once logged in, navigate to the section where your investments are listed.
• Find the mutual fund you wish to redeem from your list of investments.
• Look for an option like “Redeem” or “Sell” next to the mutual fund you wish to sell.
• Click on this option to proceed with the redemption process.

Step 3: Enter the Number of Units or Amount

• Decide how much of your investment you want to redeem.
• You can either enter the number of units you wish to sell or the amount of money you need to redeem.
• Review your entry to ensure it matches your intended redemption.

Step 4: Confirm the Transaction

• Review all the details of your redemption request.
• Confirm the number of units or the amount you want to redeem.
• Agree to any terms and conditions if prompted.
• Click on “Confirm” or “Submit” to finalise the transaction.

Step 5: Receive Funds in Your Bank Account

• After confirming, the mutual fund company will process your redemption request.
• The funds will typically be credited to your linked bank account within 2-3 business days.
• Check your bank account to ensure the redemption amount has been received.

How to Redeem Mutual Funds Offline

If you prefer traditional methods, you can redeem mutual funds offline. Follow these steps to redeem your mutual funds offline easily:

Step 1: Fill out the Redemption Form

• Get a redemption form from the mutual fund company’s website or office.
• Fill in basic details like your name, folio number (your account number with the mutual fund), and the number of units you want to redeem.
• Double-check all the information to avoid any mistakes.

Step 2: Submit the Form to the AMC or Registrar

• Submit the filled-out form to the Asset Management Company (AMC) or the registrar of the mutual fund.
• You can do this in person by visiting their office or mailing the form to them.
• Some mutual fund companies also allow submission through authorised agents or distributors.
• If you submit the form in person, make sure to get an acknowledgement receipt.

Step 3: Confirmation and Processing

• Once the mutual fund company receives your redemption form, they will process your request.
• They will verify your details and the number of units you wish to redeem.
• You might receive a confirmation call or email from the company to confirm your request.
• Processing usually takes a few days.
• The mutual fund company will calculate the redemption amount on the basis of Net Asset Value of the units on the day your form was processed.

Step 4: Receive Funds in Your Bank Account

• After processing your redemption request, the mutual fund company will transfer the redemption amount to your bank account.
• The time it takes to receive the money can vary, but typically, you should receive the funds within 3-5 business days.
• The fund will be credited to the bank account linked with your mutual fund investment.
• Make sure your bank account details are up to date to avoid any delays.

Redemption Time for Mutual Fund

Understanding the redemption process is crucial for mutual fund investors. Typically, how many days it takes to redeem mutual fund units depends on the type of fund and the policies of the asset management company. 

For equity mutual funds, the redemption process usually takes about three business days. For debt mutual funds, it often takes one to two business days.

However, the time frame may vary based on the specific mutual fund and the day you place the redemption request. It’s important to check with your fund provider for the exact details. 

Knowing how much time it takes to redeem mutual fund units helps you plan your finances better, especially if you need the funds for urgent expenses. Always ensure to factor in the redemption period when making investment decisions to avoid any liquidity issues.

Comparison of Online and Offline Redemption

Conclusion

Redeeming your mutual funds is a straightforward process, whether you choose to do it online or offline. Knowing when and how to redeem can help you make informed decisions about your investments. Always consider your financial goals and market conditions before redeeming. With this guide, you are now equipped to manage your mutual fund redemptions efficiently and effectively.