Mutual funds are considered one of the most common investment modes that individuals make to accumulate wealth. However, there may be a time when you would require withdrawing your money for various reasons like the fulfilment of a goal, paying off an expense or just shifting your investment plan. So, while it is not too complicated, withdrawals from mutual funds do require an understanding of how to go about it, the timelines and charges that one might face.
In this blog, we will walk you through the various ways of withdrawing your mutual fund investments, explain how long it takes for the respective withdrawals to be processed, and show any potential charges that may apply.
Ways to Withdraw Money from Mutual Funds
There are several ways of making a redemption or withdrawal against mutual fund investments. Here is a list of the most common ones.
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Through a Broker or Distributor
If you had invested in mutual funds through a broker or distributor, you can initiate the request for taking out the amount by contacting them. You can log in to the broker mobile or web application and key in the details like the units or amount your would like to withdraw from your invested mutual fund. Once the request is raised online, the withdrawal request will be processed and you will get the amount to your linked bank account in three – four working days.
In case you do not use the online application, you can put in the request of withdrawal with a form that can be submitted to your broker. The form is then being sent to the respective AMC and they take the request of withdrawal and process it to your bank account.
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Through Direct Channel of the AMC
You can withdraw your mutual fund investments from the Asset Management Company (AMC). The AMC is the company managing the mutual fund scheme. There are two main modes of doing so:
- Off-line
Visit the nearest AMC branch and submit a paper request for redemptions, and the AMC will process. The money would be credited into your account.
- Online
Almost all AMCs offer an online interface through which investors can trade in their mutual fund investments. Go to the website or mobile application of the AMC for which you want to seek redemption. Choose the fund, and then follow the subsequent instructions for redemption of your units.
Through this facility, the investor who wants to directly communicate with the AMC and not contact any third party is benefitted.
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Through Registrar and Transfer Agents (RTAs)
RTAs, for instance CAMS and KFintech, do play an important role in the functioning of the mutual fund industry by making the transaction possible. Investors can use RTA for withdrawing their mutual fund investments either by sending an offline submission at RTA branches or online.
RTAs thus act as an intermediary between the investor and AMC by streamlining the withdrawal process.
Mutual Fund Withdrawal Time
The time taken to withdraw the money from the mutual fund would vary with the type of mutual fund and the processing time for the AMC. Normally, after submitting a request to withdraw money, it takes about 3 to 5 business days for the money to be reflected in the bank account.
The processing time for withdrawal in equity, debt, and liquid mutual funds is different from each other. For instance, equity funds would require more time because the stock market conditions are relatively volatile, whereas for liquid funds, it could take lesser time-for instance sometimes even as less as 24 hours. However, you should always refer your mutual fund provider to know about the approximate timeline of withdrawal and whenever it is urgent, you would want to know when you would get your money.
Charges for Withdrawing Money from a Mutual Fund
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Exit Load
An exit load is a charge by the mutual fund at the time of redemption of units before a particular date. For instance, this is commonly seen in equity mutual funds, where an exit load will be levied if you are withdrawing within a period of one year from investment. The range may be anywhere from 0.5% to 1% depending on the schemes of the mutual fund.
Make sure you check the exit load structure of your mutual fund before withdrawing so you're not surprised with charges.
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Redemption Fees
Some mutual funds charge redemption fees when providing an extra charge upon withdrawal. These generally apply only to certain types of funds like in debt funds or short-term focus funds.
Knowing these fees can enable you to withdraw more efficiently. Before withdrawing, remember always to check your fund's terms and conditions for the applicable fees.
Key Takeaways
Several Withdrawal Options
Investors can withdraw mutual fund investments through brokers, DEMAT accounts, AMCs, or RTAs. Each one offers its own benefits on the issue of convenience and speed.Processing Time
Mutual fund redemption takes 3 to 5 working days, however it depends on the type of fund and AMC processing time Exit Loads and Charges
Pay attention to exit loads or redemption charges that your mutual fund redemptions might have and try to avoid as many as possible extra costs.
With this information, you will be able to manage your mutual fund investments with confidence and can better determine when and how you should withdraw your money, always mindful of keeping the financial goals for that withdrawal in mind to yield returns while keeping fees and delays low.