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    How to exit mutual fund investments

    Synopsis

    Investors can choose different modes to exit their investment in mutual funds. This can be in the form of actual redemption to switch out or systematic withdrawal plan (which can be done by signing up for a systematic transfer plan).

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    An investor can withdraw his investment in a systematic way to structure regular payouts or monthly drawdown.
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    Mutual fund investors have the convenience to invest and exit on any given business day, subject to lock-in periods, if any. The redemption amount is also subject to loads and capital gains tax. Once the mutual fund investment has fulfilled the goal for which the investment was made, one has the option to exit. Investors can choose different modes to exit their investment in mutual funds. This can be in the form of actual redemption to switch out or systematic withdrawal plan.

    Redemption
    Simple redemption can be carried out by filling up a redemption form mentioning the amount to be redeemed from the said mutual fund scheme. The form or a written application mentioning the above details along with folio number and signature needs to be submitted at the official point of acceptance of transaction. The request can also be made online through the mutual fund website or other mutual fund platforms offered by mutual fund registrars or distributors.

    Switch out
    Instead of redeeming, one can move the proceeds into another scheme of the same fund house and park it in that scheme till further use of the funds. A switch request can be made in the same fashion by giving the additional details about the switch-in scheme.

    Systematic withdrawal plan
    An investor can withdraw his investment in a systematic way to structure regular payouts or monthly drawdown. This can be done by signing up for a systematic withdrawal plan (SWP), wherein, the desired fixed amount is redeemed from the investment and paid out to the investor on a stated date and a stated frequency. An SWP form needs to be filled and submitted to activate this plan.

    Points to note
    • A withdrawal from the investment, in any of the above forms, amounts to redemption of units and is subject to the same treatment with respect to taxation and loads.
    • A systematic transfer plan is systematic way of switching investments from one scheme to the other.

    (Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
    (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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    1 Comment on this Story

    Vilas Save68 days ago
    Mutual fund exits entail capital gains or loss.With SWP, it becomes very tedious to file income tax returns and the IT utility often give wrong results.Artcles should be written to help understand the system/procedure for seamless working.
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