How do you withdraw money from mutual funds?

Investing in mutual funds is a popular choice for many, and there is abundant information available on how to go about the process. However, there may come a time when you want to withdraw money from these investments. Knowing how to redeem funds from a mutual fund is just as important as knowing how to invest, so that you can access your money if the need arises. It is equally important to know what factors to consider before making withdrawals, to ensure that your investment strategy does not deviate from your goals.

In this article, we’ll take a closer look at the process of redeeming mutual fund units and what to bear in mind when making a withdrawal.

• Table of contents

1. Understanding mutual fund withdrawals
2. Significance of cut-off time
3. How do you withdraw money from mutual funds?
4. How do you withdraw money from mutual funds online from Bajaj Finserv AMC?
5. Factors to consider while submitting a mutual fund redemption request

Understanding mutual fund withdrawals

Before we get into the steps involved, it's important to understand what happens when you withdraw money from a mutual fund. This process is called redemption. You can withdraw either a part of or all the money invested in a fund. When you redeem units from mutual funds, you essentially sell your units back to the fund. The money you get is based applicable Net Asset Value (NAV) of your mutual fund depending on the time that you place your redemption request.

There might also be some charges involved, like an exit load, which is a fee charged by the fund if you redeem your units before a specified period. Not all mutual funds have this fee, but it's important to be aware of it.

Significance of cut-off time

When placing a redemption request, investors must factor in the cut-off time. The Net Asset Value (NAV) you get for your units depends on the time at which you place the redemption request. A scheme’s NAV can change day-to-day as it is based on market value of the underlying securities. The cut-off time for redemption requests is 3 pm on business days. If the request is received by the Asset Management Company (AMC) that runs the scheme before 3 pm, investors will be able to redeem units at the same day’s NAV. For redemption requests placed after 3 pm, the next day’s NAV will be applicable.

How do you withdraw money from mutual funds?

There are several ways to withdraw money from your mutual funds. Let's look at each of the methods in detail.

a) Through the Asset Management Company (AMC)

You can redeem funds directly through the AMC that manages your mutual fund investment. The steps that are typically involved are listed below. However, the exact procedure may depend on the AMC.

1. Visit the AMC's website or branch: You can either go online to the AMC's website or visit their office.
2. Log in to your account: If you’re doing it online, then you can log in using your credentials to access your mutual fund investments.
3. Select the fund for redemption: Choose the fund that you wish to redeem units from.
4. Enter the redemption details: Enter the redemption amount or number of units you want to redeem.
5. Confirm and submit the request: Review the details and confirm your redemption request.

The redemption amount will be deposited into your registered bank account.

b) Through the Registrar and Transfer Agent (RTA)

You can also withdraw your money with the help of the Registrar and Transfer Agent (RTA) of the mutual fund. The RTA manages the records of investors on behalf of the AMC.

1. Identify the RTA: Find out who the RTA is for your mutual fund (such as CAMS or KFintech).
2. Fill out a redemption form: Visit the RTA's website or office, download the mutual fund redemption form and fill in the required details like your folio number, the scheme name, and the amount or units to redeem.
3. Submit the form: Submit the form either online or at a nearby branch of the RTA.

Once processed, the amount redeemed will be credited to your registered bank account.

c) Through a broker or distributor

If you have invested in mutual funds through a broker or distributor, you can initiate a withdrawal through them. These are the steps that may be typically involved:

1. Contact your broker: Reach out to your broker or distributor and inform them of your need to redeem mutual fund units.
2. Provide necessary details: Share details such as the scheme name and the amount or number of units you wish to redeem.
3. Broker initiates the process: The broker will take care of the paperwork and initiate the redemption process on your behalf. However, this process will get completed on necessary approval from the investor for the redemption request.

The money will be transferred to your bank account after the request is processed.

d) Through your trading and DEMAT accounts

If you have invested in mutual funds through a trading and DEMAT account, you can redeem units through the same platform.

1. Log in to your trading account: Start by logging into your online trading account where you initially purchased the mutual fund units.
2. Go to the mutual fund section: Go to the section that lists your mutual fund holdings.
3. Select the fund: Choose the mutual fund from which you want to withdraw money.
4. Place the redemption request: Enter the number of units you wish to redeem or the amount of money you want to withdraw.
5. Confirm your request: Once you've entered the details, confirm your redemption request.

The money will be credited to your bank account linked to your trading account, typically within a few days.

How do you withdraw money from mutual funds online from Bajaj Finserv AMC?

If you have invested in mutual funds through Bajaj Finserv AMC, the process is easy and straightforward.

1. Visit the Bajaj Finserv AMC website.
2. Click on the login/signup button to go to the investor portal.
3. Log in to your account by entering your PAN details. Then, an OTP will be sent to your registered email address and mobile number.
4. Go to the ‘Transact Now’ tab and select the ‘Redemption’ option.
5. Select your folio number (if you have more than one) from the dropdown menu.
6. Select the scheme from which you wish to redeem units.
7. Enter the amount you wish to redeem.
8. Choose your bank account from the dropdown menu.

Your funds will be transferred to your registered bank account. The timeline depends on the scheme and can take up to a few business days.

Factors to consider while submitting a mutual fund redemption request

When you're about to withdraw money from your mutual funds, there are a few important factors to keep in mind:

1. Reason for redemption: It is best to stay invested till you potentially reach your goals. Hence you should only redeem units if you have a pressing need for funds that cannot be met through other avenues.
2. Choosing the scheme: If you have more than one mutual fund investment, consider which scheme you want to redeem from. For instance, a debt fund may be a better option if you are withdrawing money before reaching your goal amount, because equity funds offer more long-term growth potential.
3. Exit load: Check if your mutual fund charges an exit load. This fee is deducted from your redemption amount if you sell your units before a certain period.
4. Tax implications: Redemption of mutual funds can lead to tax liabilities. Capital gains are taxable and the rate depends on the type of scheme and the holding period. For equity funds, capital gains exceeding Rs. 1.25 lakh on units held for more than a year at taxed at 12.5%. Gains on units held for less than a year are taxed at 20%. For debt funds, capital gains are added to the investor’s annual income and taxed as per their income tax slab, regardless of the holding period.
5. NAV fluctuations: The amount you get depends on the NAV applicable at the time you place the redemption request. The NAV fluctuates daily, so your redemption amount may vary slightly from your expectations. Also, if your need for funds is not urgent, you may consider putting off the redemption request if the markets are down and NAV is lower.
6. Processing time: The time it takes for the money to reach your account can vary based on the asset management company and the scheme. Some schemes may offer instant redemption, while others may require you to wait a few business days.
7. Partial redemption: If you don't want to withdraw all your money, you can opt for a partial redemption. This allows you to redeem only a portion of your units and keep the rest invested.

Conclusion

Whether you choose to redeem through your trading account, an RTA, a broker, or directly through the AMC, each method is designed to ensure that you can access your funds quickly and easily. It’s important to consider factors like exit loads, taxes, and NAV fluctuations when making your decision. Moreover, the decision to redeem units must be taken after considering your investment goals and plans.

FAQ

Can I take money out of my mutual fund at any time?

Yes, you can withdraw money from your mutual fund at any time. However, some schemes may entail an exit load if you withdraw before a specified period. Additionally, capital gains may be taxable.

How much time does it take to handle a redemption request for a mutual fund?

The duration depends on the scheme. Some schemes may offer instant redemption, while others may require 3 business days.

Does redeeming a mutual fund come with any costs?

Redeeming a mutual fund may come with costs like exit loads if you withdraw before a certain period. Additionally, taxes may apply based on your holding period and the type of mutual fund.

Can I partially redeem my mutual fund units?

Yes, it is possible to partially redeem your mutual fund units. This allows you to withdraw only a portion of your investment while keeping the rest in the fund.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.