Mutual funds are an appealing option because they offer liquidity and returns. You can beat inflation with the returns earned from mutual funds and withdraw funds whenever needed. However, since some mutual funds are linked to the market, they may be risky. A few mutual funds, meanwhile, have a lock-in period, and you can only withdraw money after the lock-in period is over.
For instance, ELSS funds (Equity Linked Savings Schemes) have a lock-in period of three years post which you can withdraw your investments partially or fully. Read the article below to understand how mutual funds work and how to withdraw money from mutual funds.
What does liquidation in mutual funds mean?
Liquidation refers to the process of withdrawing your investment from mutual funds. It is also known as mutual fund redemption. Individuals invest in mutual funds for capital gains. When a mutual fund’s Net Asset Value (NAV) reaches a particular NAV, you can withdraw them to earn a profit. The returns are based on the market performance and may fluctuate over time.
In the redemption process, you sell the units of mutual funds you own and get the corresponding NAV (Net Asset Value) as capital gains. For instance, assume you invested ₹20,000 in a mutual fund to redeem it when your returns reach ₹25,000 value. You can withdraw your money partially or fully whenever it hits the ₹25,000 mark to meet your goals. You can also wait for the index to increase based on your risk appetite.
How to withdraw money from mutual funds?
Redeeming money from a mutual fund is a simple and streamlined process. There are numerous ways to withdraw your money, as mentioned below:
- Through an Asset Management Company (AMC)
You can directly reach out to your Asset Management Company (AMC) and request mutual fund withdrawals. Ensure to file your application within the cut-off time to get the same-day NAV. You can visit the AMC branch in person, log on to their official portal, and withdraw your mutual funds.
- Through Registrar and Transfer Agent
Registrar and Transfer Agents assist in investing in mutual funds and withdrawing your investments. You can reach out to them and withdraw money from your mutual funds by submitting an online or offline application at your ease.
- Through trading or a Demat account
Alternatively, if you use a Demat or a trading account, you can directly log into your account and the mutual fund you wish to withdraw money. Choose the amount or the units you want to withdraw and file your application. Once your application is processed and approved, you will receive your investments through the modes you have chosen for redemption.
- With the help of your broker or distributor
You can contact them and file a mutual fund withdrawal request if you have made a mutual fund investment through a broker or distributor. You need to apply for withdrawal through a written request mentioning the details of mutual funds. The broker or the distributor will then submit your request to your respective AMC (Asset Management Company) for mutual fund withdrawal.
If your broker runs an online mutual fund service, you can apply for mutual fund withdrawal online through the mobile app or the portal. You need to log in to your mutual fund account, choose the withdrawal option, select the number of units you wish to sell or the amount you want to withdraw and submit your online application. Your application will be processed, and the funds will be withdrawn in real-time.
You can redeem your mutual funds and get cash if you have emergency financial requirements. Moreover, these funds provide the flexibility of withdrawing funds wholly or partially. However, along with knowing how to withdraw money from your mutual funds, you must also know the exit load and the tax implications to determine the right amount you would receive on redemption.