How to redeem mutual fund units

Redeeming from a mutual fund is a straightforward process. Investors can choose to redeem a part or all of their investment depending on their financial needs and goals.

Redemption of units
Redemption of units allows investors to take a specific number of units from their mutual fund investment. This method is ideal for investors who need to withdraw a part of their investment while keeping the rest invested. It is also useful when the NAV (net asset value) is high, and fewer units can provide the required amount.


Value redemption
Redeeming mutual fund value allows investors to take money, instead of a specific number of units. The corresponding units are calculated based on the current NAV. This is ideal for investors who need a specific amount of money. It is useful during financial emergencies where a fixed sum is required.

Full redemption
Full redemption involves withdrawing the entire investment from the scheme. This is typically done when the investor no longer wishes to continue with the scheme.

Systematic withdrawal plan
SWP allows investors to withdraw a fixed amount or number of units at regular intervals. It provides a steady income stream while keeping the rest of the investment intact. It is ideal for retirees or those who need regular income. It is useful for creating a secondary source of income.

Process
The investor needs to fill up the redemption form/SWP form at the fund house website or at their office. Folio number, bank details, identity proof may need to be attached for processing the request.

Time taken for redemption
• Equity funds: Typically take 3-4 working days.
• Debt funds: Within 1-2 working days.
• Liquid funds: Processed within one working day.
• For SWP, the chosen amount is credited to the bank account as per the predefined schedule (monthly, quarterly, etc).

Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.