Systematic Investment Plans (SIPs) help you potentially build wealth over time in a systematic and affordable way. Their convenience lies in that they allow investors to contribute small amounts regularly, ultimately inculcating a desirable habit of investing.
However, although the pattern of investing becomes habitual, your financial goals or performance of the mutual fund itself may change. This scenario may compel you to consider transferring your investment to an alternative AMC (Asset Management Company) fund.
But how would you transfer your investment? This guide will provide you with all the information you need on how to transfer your SIPs in India.
Reasons To Switch From One Sip To Another AMC
There are several reasons why one might want to switch from one AMC to another. Here are a few common ones:
- To invest in a fund with better performance or risk-adjusted returns.
- Lower charge structure such as expense ratios or exit loads.
- Access to new schemes not available with your current AMC.
- Enhanced digital interfaces, resources or customer service
A Clear Step-By-Step Process Of Switching Between AMCs
You usually cannot directly switch or transfer your SIP from one AMC to another. You will need to terminate your ongoing SIP, redeem your existing units and reinvest those in the new fund, which could trigger tax liabilities.
In case you intend to switch from one AMC to another, you must involve both fund houses. Each AMC may have unique documentation processes. However, here are some of the common steps involved:
- Review your current portfolio to identify funds that no longer align with your financial goals and risk appetite.
- Research other available AMC options and pick one that seems to meet your requirements.
- Check for exit loads and capital gains tax of your current investments that you plan to discontinue.
- Redeem units from your existing fund. Or, you can terminate your SIP to cease new investments but let your accumulated capital stay invested in the original scheme.
- Fill out the application form with your new AMC, complete the KYC formalities and submit the necessary documents.
- Set up the new SIP mandate and wait for confirmation.
- Once your investment is confirmed, you can track your investment through the AMC’s website or app.
Read Also: A Step-by-Step Guide to Switching Mutual Funds
Benefits of Switching AMCs
Switching your SIP from one AMC to another can offer potential advantages:
- Improved fund performance: If your current fund is underperforming its peers, moving to a different one could yield better potential returns.
- Better fund management: Some AMCs have a stronger track record in terms of fund management and consistency in returns. (*Past performance may or may not be sustained in future).
- Cost efficiency: Lower expense ratios mean higher net returns for you. Switching to a fund with a lower expense ratio could help you save money in the long run. However, the expense ratio must not be the only consideration while switching funds.
- Diversification: By transferring to a new AMC, you may be able to access different sectors, asset classes, investment strategies or geographic regions not covered by your existing scheme.
However, investors should bear in mind that while switching AMCs can offer some advantages, changing funds frequently in the pursuit of better short-term returns may not be prudent and past performance may or may not be sustained in future. Chasing recent performance may lead to poor timing decisions, tax liabilities, and unnecessary exit loads. Instead, evaluate whether the switch aligns with your long-term financial plan and investment horizon.
Read Also: Systematic Transfer Plan (STP): Meaning, Types, Benefits and How it Works?
How To Choose An Amc For Your Funds
When considering switching to a new AMC, here are a few tips to help you make an informed choice:
- Check historical fund performance over 3–5 years and look at performance over different market cycles.
- Compare expense ratios and exit loads
- Check the investment process
- Assess the quality of digital platforms and customer support.
At this stage, you may also use an SIP calculator to project potential investment outcomes and plan your new investment. If in doubt, consult a financial advisor for tailored solutions before making any decisions.
Conclusion
In summary, transferring SIPs from one AMC to another can be a suitable way to realign your investments with your financial goals. Whether you are looking for better fund performance, lower costs, or improved service, switching to a different AMC can offer several potential benefits. Taking charge of how to transfer SIP also shows you value adaptability and control in your investment path.
FAQs:
Can I switch mutual funds between different AMCs?
You cannot directly transfer between different AMCs. However, you can terminate your investments in the existing scheme, redeem all units and reinvest them in a new scheme with a new AMC.
How can I transfer mutual fund units from one AMC to another?
Discontinue your choice of investments from your portfolio, redeem them and reinvest into a new one of your choice.
Is there a tax implication when switching between AMCs?
Yes, any withdrawal of units will be treated as a redemption. If you made profits, capital gains tax will apply. You should consult with your tax advisor as the tax rules may vary and change.
What documents do I need to switch between AMCs?
You would need the same documents that are required for setting up an account with an AMC. This will include your PAN card, contact information and bank details. If you are not KYC validated through your Aadhaar card, you may need to complete your KYC journey, for which you may need additional documents.
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