How to redeem mutual funds online

When you buy something, the whole idea is to keep the thing, enjoy it, ulise it, and even cherish it. As Indians, we also think of unique ways of using our purchases, long past their actual life. Think about your favorite t-shirt which probably has been used for multiple purposes, including as a mop. Seldom do we sell our things. But when it comes to your investments, the approach should be completely different. The reason you invest is to reach a particular goal. The goal could be to go on a vacation, buy a car, make a down payment on a home loan or even to create a nest egg for your future. Whatever may the goal be, you have to eventually sell your investment to realize your goal. If you are a mutual fund investor, this means that you have to eventually redeem your mutual fund units. Unfortunately, most investment literature tends to focus on when to buy and what to buy. However, knowing when to sell and how to sell is an equally important part of astute financial planning.

Redeeming your mutual fund investments

Redeeming mutual funds refers to the process of withdrawing units from your investment and geng the invested amount and the returns earned, credited to your account. Under mutual fund redemption, you sell your units to the Asset Management Company (AMC). Based on the current value, the AMC offers you money for the same. There are various reasons wherein you may go for mutual fund redemption, including a financial emergency, underperformance of the scheme or, simply, the end of your investment horizon.

Steps to redeem your mutual fund units

The best thing is that redeeming your mutual investments is a simple and easy process, especially if you decide to redeem them online. Let's take you through the step by step process for redeeming your mutual funds online.

Step 1: Log in to the mutual fund website

Step 2: On the site, log in to the 'Online Transaction' page and enter your secure details, such as the folio number or your PAN card.

Step 3: Select the scheme and the amount that you wish to redeem and then confirm your transaction.

Once you complete these steps, the amount will be credited to the bank account linked to your scheme, usually within 1 to 5 working days. If you redeem units of a liquid fund, your amount will be credited in T+1, which is one working day are the redemption while other funds require T+3 days.

If you are wondering exactly what amount will be credited to your account aer redeeming mutual fund units, you can take a look at the Net Asset Value, or NAV, of the fund scheme.

The NAV of a mutual fund scheme is basically the per share or per unit value of a mutual fund portfolio. It is calculated as:

NAV = (Market value of the portfolio less liabilities) / total number of fund units

If your redemption request is submitted within the cut off time, usually 1:30 PM for liquid funds and 3:00 PM for all other funds, then the NAV of the fund, at the end of the day, is used to calculate your earnings. In addition, if you are redeeming your units during the exit load period, your earnings will reflect the consequent charge and adjust accordingly. You can find the applicable exit load on your fund in the fund scheme description and calculate it using the following formula:

Exit load percent (as menon in the scheme document) X No. of units owned by you X NAV of the scheme.

Your total earnings will be reduced by the amount calculated above.

While it is easy to redeem mutual funds online, you should opt for it only during emergencies or when the investment horizon is complete to ensure optimal returns.