How Do You Withdraw Money from Mutual Funds?

Dec 16th 2023
Mutual Fund
How To Withdraw Money from Mutual Funds

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.

Read More: How Can I Withdraw Money From a Mutual Fund SIP Investment?

What Is Mutual Fund Redemption?         

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.

Different Types of Mutual Fund Redemption:

There are different types of mutual fund redemption that one should be aware of. Take a look at them below.

Regular Redemption

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.

Systematic Withdrawal Plan (SWP)

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.

Swapping Funds

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.

Partial Redemption

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.

Capital Gains Redemption

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?

How to Submit a Mutual Fund Redemption Request?   

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.

  • Via an asset management company or mutual funds agent: As a mutual fund investor, you can choose between an online and offline redemption request by visiting the website of the asset management company (AMC) or you can also contact the registrar and transfer agent (RTA) of the respective mutual fund. To get things done feasibly, you will need to have your bank account details, PAN, and most importantly folio number. Given the exact available fund value in your account, it can be expected to get the redeemed amount in your bank account in a couple of days.
  • Via a digital platform, agent, or broker: It is also possible for investors to submit a redemption request if they are associated with a mutual funds app like Investkraft, a fund agent, or broker. Your request will be processed through the respective agent, broker, or platform, and the redemption amount will be credited to your account.
  • On your own: if you are aware of today’s digital platforms, you can easily choose to redeem mutual funds yourself if you invested the amount on your own and without any middleman. It is very simple. You just have to visit the respective mutual fund's website and put in your login credentials. To redeem the available units, pick the fund, mention the number of units you want to redeem, and submit your request. Depending on the kind of money, you can expect to receive the redemption amount in your bank account in a few days.

Also Read: How to Choose The Best Mutual Funds in India?

Things to Consider While Submitting a Mutual Fund Redemption Request

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.

Objective

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.

Asset Allocation

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.

Also Read: What Are The Best Mutual Funds To Invest In India?

Diversify

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.

Tax implications

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.

The Conclusion

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.

FAQs

How Much Does Mutual Fund Redemption Take?

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.

Does the Withdrawal Amount Carry Tax?

Yes, mutual fund redemption is liable for tax. The actual tax value depends on the respective fund scheme and type of fund.

What is the Lock-in Period?

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.

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