How To Do Mutual Funds Redemption : A Comprehensive Guide

Mutual funds serve as a cornerstone of many investors’ portfolios, offering a diversified approach to wealth accumulation. While investing in mutual funds is relatively straightforward, Mutual Fund Redemption can sometimes seem like a daunting task for beginners. Mutual fund redemption is the process by which investors sell back their mutual funds to the Asset Management Company (AMC).

Like what you're reading?

Get our latest, straight to your inbox.

Subscribe to our newsletter

Why Mutual Funds Redemption?

There are several key reasons why investors choose to Mutual Funds Redemption:

1. Completion of Goals:
   • Investors typically invest in mutual funds with long-term financial goals in mind, such as saving for a child’s education or purchasing a home. Once these goals are achieved, they often choose to sell or redeem their funds.
2. Fund Underperformance:
   • Some funds may consistently underperform over time. In such cases, it’s logical for investors to sell the underperforming fund and switch to better-performing alternatives.
3. Financial Emergency:
   • A financial emergency, such as a medical crisis or unexpected job loss, may necessitate immediate access to funds. In such scenarios, investors may choose to redeem their mutual funds.

How to do Mutual Funds Redemption?

Once the reasons for mutual funds redemption are identified, the next question is how to redeem mutual funds. Here’s a guide:

1. Directly through AMC:
   • Asset Management Companies (AMCs) are the entities that issue mutual funds. Investors can sell their mutual funds back through the AMCs’ online portals or offline by submitting a redemption request.
2. Demat Redemption:
   • If mutual funds were acquired through a Demat platform with a broker, such as Zerodha, they can be sold by submitting a sell request to the broker.
3. Through Agent or Distributor:
   • Central services like CAMS or Karvy provide mutual fund redemption services. Distributors like Groww and Zerodha Coin also offer redemption services conveniently.

Also Read :Fixed Deposits vs. Debt Mutual Funds: The Legacy of Top Investments in India

Types of Mutual Funds Redemption

There are different types of mutual fund redemptions based on investor preferences:

1. Unit-Based Redemption:
   • An investor specifies the number of mutual fund units they intend to sell at the current Net Asset Value (NAV).
2. Amount-Based Redemption:
   • An investor designates a specific amount they wish to redeem, and the corresponding units are automatically debited at the prevailing NAV.
3. Redeem All:
   • An investor can redeem the entire amount invested in the fund.

Note: It’s crucial to consider the exit load of a mutual fund. Equity funds typically impose a 1% exit load on the invested amount if redeemed within a year, while debt funds have varying minimum holding periods.

Process of Redemption through AMC

Let’s dive into a step-by-step guide on how to redeem your mutual funds through an AMC:

1. Visit the AMC’s Online Portal:
   • Access the official website of the AMC where you hold your mutual fund.
2. Log in to Your Account:
   • Use your credentials to log in.
3. Select the Mutual Fund:
   • Choose the mutual fund you want to redeem.
4. Choose the Method of Redemption:
   • Select whether you want to redeem by amount, unit, or all.
5. Confirm the Approval Request via SMS:
   • Complete the transaction by confirming the approval request sent via SMS.
6. Receive Funds:
   • You will receive the redeemed amount in your bank account (T+3 days for equity funds).

Bottom Line

Seek guidance from a financial advisor before opting for mutual funds redemption. Premature redemption can lead to missed opportunities to accumulate significant wealth in the long run. Make informed decisions and consider the long-term implications of your investments.