How to Redeem Mutual Funds Online: Meaning & Charges
Mutual funds are a popular investment option for those who want to diversify their portfolio and grow their wealth. One of the key benefits of investing in mutual funds is the ease of buying and selling them.
Redeeming mutual funds is the process of selling them back to the fund house or asset management company. In this article, we will discuss the meaning of redeeming mutual funds, how to redeem mutual funds online, and the steps involved in the process.
Redeem Meaning in Mutual Fund:
Redeeming mutual funds means selling them back to the fund house or asset management company. When you invest in a mutual fund, you purchase units of the fund at a certain price.
When you redeem a mutual fund, you sell those units back to the fund house at the prevailing market value. The redemption price depends on the net asset value (NAV) of the fund at the time of redemption.
How to Redeem Mutual Funds Online:
Redeeming mutual funds online is a convenient way to sell your units without the hassle of physical paperwork. Here's how you can redeem mutual funds online:
- Log in to your mutual fund account: The first step is to log in to your mutual fund account using your user ID and password. If you don't have an online account, you can create one by providing your personal and investment details.
- Select the mutual fund you want to redeem: Once you have logged in, select the mutual fund you want to redeem from your investment portfolio.
- Click on the 'Redeem' option: Next, click on the 'Redeem' option to initiate the redemption process. You will be prompted to enter the number of units you want to redeem or the amount you want to redeem.
- Confirm the redemption details: After entering the redemption details, review them carefully and make sure they are correct. Once you are satisfied, click on the 'Confirm' button.
- Choose the payout option: After confirming the redemption details, you will be asked to choose the payout option. You can choose to get the redemption amount credited to your bank account or get a physical cheque.
- Submit the redemption request: The final step is to submit the redemption request. The redemption amount will be credited to your bank account or a cheque will be sent to your registered address, depending on the payout option you have chosen.
Types of Redemption:
There are two types of redemption methods available for mutual funds investors. They are:
- Full redemption: In this method, the entire investment is sold at one go, and the entire value is transferred to the investor's account.
- Partial redemption: In this method, the investor can sell a portion of their investment. The remaining units are left intact in the investor's account.
Things to Consider Before Redeeming Mutual Funds:
Before redeeming mutual funds, there are a few things you should consider, such as:
- Exit Load: Check if your mutual fund has any exit load charges. Exit load is a fee charged by the mutual fund company if the investor redeems their units before a specified period.
- Tax Implications: Check the tax implications of redeeming mutual funds. Short-term capital gains are taxed at a higher rate than long-term capital gains. So, if you have held the mutual fund for more than a year, you can enjoy the benefit of long-term capital gains tax.
- Market Conditions: Before redeeming mutual funds, consider the market conditions. It is advisable to redeem your investment when the market is up, so you can get a higher redemption value.
Redeeming Mutual Funds through Mobile Apps:
Many mutual fund companies have developed mobile apps that allow investors to redeem mutual funds on the go. Here's how you can redeem mutual funds through mobile apps:
- Download the mobile app of the mutual fund company.
- Log in to your account using your credentials.
- Select the mutual fund you want to redeem.
- Enter the number of units or the amount you want to redeem.
- Choose the payout option.
- Confirm the redemption details.
- Submit the redemption request.
Redeeming Mutual Funds in Case of SIPs:
In case you have invested in mutual funds through a Systematic Investment Plan (SIP), you need to follow these steps to redeem your investments:
- Stop your SIP: The first step is to stop your SIP by logging in to your mutual fund account and canceling the instruction.
- Wait for the lock-in period to end: If you have invested in ELSS funds, there is a lock-in period of three years. You cannot redeem your investments before the end of the lock-in period.
- Redeem your investments: After the lock-in period, you can redeem your investments by following the steps mentioned above.
Redeeming Mutual Funds in Emergency Situations:
In case of emergency situations, you may need to redeem your mutual fund investments. Here are a few things to keep in mind:
- Redeem only the required amount: Only redeem the amount that you need for the emergency. If you redeem your entire investment, you may miss out on future market growth.
- Consider the tax implications: In case you redeem your investments before the completion of one year, short-term capital gains tax will be applicable.
- Keep a reserve fund: It is advisable to keep an emergency fund that can cover your expenses for at least six months. This can help you avoid redeeming your mutual fund investments in emergency situations.
Redemption Request Status:
After submitting your redemption request, you can track the status of your request by logging in to your mutual fund account. The status of your request will be shown as 'Under Process', 'Processed', or 'Rejected'. If your request is rejected, you will receive an email stating the reason for rejection.
In conclusion, redeeming mutual funds online is a simple and convenient process that can be completed from the comfort of your home. With the availability of mobile apps, investors can easily redeem their mutual fund investments on the go.
Before redeeming your investments, it is important to consider factors such as exit load, tax implications, and market conditions to make an informed decision. In the case of SIP investments, investors need to follow specific steps to redeem their investments.
In case of emergency situations, it is advisable to redeem only the required amount and keep an emergency fund to cover expenses. By keeping these factors in mind, investors can get the best value for their investments while managing their financial goals effectively.