How to Redeem Mutual Funds Online

Mutual funds offer the benefit of diversification and professional management, making them a convenient option for investors who do not have the time or expertise to invest in individual stocks.

However, there comes a time when investors want to exit their mutual fund investments to either realise profits or reallocate their investments.

Let’s explore what redemption means in a mutual fund, how to redeem a mutual fund online, and how to exit a mutual fund investment.

What is Redemption in Mutual Funds?

Redemption in a mutual fund is the process of selling units to the fund house or the Asset Management Company (AMC) that manages the fund. When you redeem your mutual fund, you essentially sell your investment in the mutual fund and receive the proceeds in your bank account.

How to Redeem Mutual Fund Online

Here’s how you can redeem your mutual fund investments online.

Step 1: Log in to your mutual fund account

To redeem mutual funds online, you must first log in to your mutual fund account on the AMC's website or mobile app. If you do not have an account, you must create one and link your mutual fund investment to your account.

Step 2: Select the mutual fund and the units you want to redeem

Once logged in, you need to select the mutual fund you want to redeem and the number of units to redeem. The redemption proceeds are generally credited to the registered bank account linked to your mutual fund investment.

Step 3: Confirm and Submit

After verifying the details, you must confirm and submit the redemption request. The mutual fund units will be redeemed, and the proceeds will be credited to your bank account within a few working days.

How to Redeem Mutual Fund Investments Offline

If you prefer to redeem your mutual fund investments offline, you can do so by following the methods listed below:

• Visit the nearest AMC branch or Investor Service Centre and submit the redemption form.
• Send the redemption form through post to the AMC.
• Submit the redemption request through a registered investment advisor or a broker.

Things to Consider While Redeeming Mutual Funds

Investors are recommended to know and consider the following factors before redeeming their mutual fund investments.

Exit Load

Some mutual funds charge a redemption fee or exit load if you redeem your fund units before a specified period. You should check the mutual fund's scheme information document (SID) for the applicable exit load or redemption charges.

Tax Implications

When you redeem your mutual fund, you may be liable to pay capital gains tax on your profit. The tax implications will depend on the type of mutual fund and the duration of your investment.

Timing

Mutual funds are priced based on the Net Asset Value (NAV), calculated at the end of the day. Hence, the redemption request made before the cutoff time will be processed at the NAV of the same day, while the requests made after the cutoff time will be processed at the NAV of the next day. The applicable NAV depends on the time the request is received and the relevant cut-off rules.

Bank Details

You must ensure that you provide the correct bank account details while redeeming your mutual fund, as the proceeds will be credited to the account provided.

Benefits of Redeeming Mutual Funds

The following are the benefits of redeeming your mutual fund investments.

Liquidity

When investors redeem their mutual fund investments, they get access to cash, increasing their liquidity.

Achieve Financial Goals

Redeeming your mutual fund investments helps achieve major financial goals such as a home down payment or children’s marriage.

Realise Gains

If you redeem your mutual fund units during favourable market conditions, you can potentially realise gains from the investment.

Risks of Redeeming Mutual Funds

The following are the risks of redeeming mutual funds investments.

Exit Load

Some mutual funds charge an exit load or redemption fee if investors redeem their funds before a specified period. Investors should check the applicable exit load before redeeming their mutual funds.

Tax Implications

When investors redeem their mutual funds, they may be liable to pay capital gains tax on their profit. The tax implications will depend on the type of mutual fund and the investment duration.

Market Volatility

The value of mutual funds is subject to market fluctuations, and investors may face losses if they redeem their mutual funds during a market downturn.

Opportunity Cost

Redeeming mutual funds means withdrawing the funds from the investment, and investors may miss out on potential gains if they exit the investment too early.

FAQs

What does redemption mean in mutual funds?

Redemption simply means selling your mutual fund units back to the fund house to get your money credited into your bank account.

What is an exit load in mutual funds?

An exit load is a small fee charged by some fund houses if you sell or withdraw your mutual fund units before a specific period.

What happens if I submit my redemption request after the cutoff time?

If you submit your redemption request after the daily cutoff time, your mutual fund units will be sold based on the NAV of the next working day instead of the same day.

What is the difference between redeeming and switching a mutual fund?

Redeeming withdraws your money to your bank account, while switching moves your invested money directly into another scheme within the same fund house.

How does a SWP work?

An SWP allows you to automatically withdraw a fixed amount of money from your mutual fund investment corpus at regular intervals, providing a steady stream of income.