How Do You Withdraw Money from Mutual Funds? In recent times, the popularity of mutual funds as an investment tool has skyrocketed among people of all sorts. From self-employed individuals to salaried people, everyone is around if crazy for mutual funds. Thanks to internet media, people have become immensely aware of the benefits of mutual funds like never before. The best thing about mutual fund investment is the flexibility associated with it. Whether you want to invest as low as Rs. 100 or as high as 100000, there is always a way to get this done.
You can opt for a monthly SIP or invest as a lump sum amount for investment in mutual funds. Moreover, mutual funds investment comes with easy liquidity which means if you need urgent funds for any purpose, you can redeem the funds and get the amount in your bank account within 3-4 days.
For those who have already invested in mutual funds, it is necessary to know everything about mutual fund redemption. This is a great help to those who face a financial emergency for any reason. In this post, we will discuss how you can withdraw money from mutual funds.
In simple terms, mutual fund redemption refers to the withdrawal of an amount from the mutual fund where the investor has an account and has been investing money in that fund. There can be different types of mutual fund redemptions that have been defined below.
There are different types of mutual fund redemption that one should be aware of. Take a look at them below.
It is one of the most widely chosen types of fund redemption. A person can redeem their available fund units on any working day. He needs to submit a redemption request and the asked money will be deposited in his bank account in 3-4 days.
This type of withdrawal refers to the exit of the monthly amount from the mutual fund account. It is commonly known as SWP (SWP) and you can withdraw a fixed amount every month.
It is for those who want to move from one mutual fund to another. However, both funds need to be from the same fund house. This helps investors in realigning their investments given their specific needs.
If you don’t want to withdraw the complete available amount, this is called partial redemption. You can withdraw a part of the available units or amount for any purpose you have.
This entitles you to redeem the profits made in the chosen mutual fund. The best thing is that your primary investment would remain intact.
Also Read: How Long Should We Invest In Index Funds?
If you already have funds in your mutual funds account and there is no lock-in applicable at this time, you can easily submit a redemption request. There are several ways to do it. Get to know them below.
If you have made up your mind about mutual fund redemption, you must remain aware of all the major things that have a say in your overall experience and benefits. Take a look at them below.
In most cases, people invest in mutual funds for a certain goal. The tenure of the investment largely depends on the set objective like retirement planning, daughter’s wedding, home buying, car buying, education, etc. According to experts, one should opt for mutual fund redemption only when it is extremely necessary or you are about to achieve the goal you set earlier.
You must choose an appropriate mutual fund scheme before you start investing. You can choose a scheme that can help you achieve your goal easily and quickly. Mutual funds can be of different types like low risk, high risk, equity-based, debt funds, hybrid, and more. You should allocate the available funds accordingly to get the desired outcomes down the line.
It is advisable to invest your money in two or more schemes. This is a good idea to reduce the risk associated with a market downturn. Investing your entire amount in one scheme can make you susceptible to big losses if the market turns negative.
Eventually, you must check the tax liability on the withdrawal amount from mutual fund redemption. The amount withdrawn from a mutual fund is usually liable for taxes. Having this knowledge is of extreme importance before you submit a mutual fund withdrawal request.
Mutual fund withdrawal is a great idea for people who come across some urgent need for cash. This way, they don’t need to borrow money from banks and lenders which helps them avoid paying hefty interest charges. Even easy liquidity is one of the salient features of mutual funds which means investors can choose to withdraw the amount whenever they can in the case of need. However, before you submit a mutual fund withdrawal request, take into account the aforementioned factors to avoid suffering any loss.
In most cases, investors can expect the money in their bank account within 3-4 working days. This may vary from one mutual fund to another. Do check the fund details for more clarity on this part.
Yes, mutual fund redemption is liable for tax. The actual tax value depends on the respective fund scheme and type of fund.
In some mutual fund schemes, investors are not allowed to withdraw amounts from their funds for a set period. In most cases, the limit is capped at 3 years. This period is popularly known as the lock-in period.