People who want to invest in the stock market without having to directly buy or manage stocks usually prefer mutual funds. Most people ask whether it is possible to withdraw mutual funds at any time. The answer is affirmative; however, there are some aspects one needs to pay attention to while withdrawing their mutual funds. Additionally, some types of mutual funds can be withdrawn only after certain periods.
Can one withdraw mutual funds anytime?
We can redeem investments made in open-end schemes anytime we want. But equity linked savings scheme (ELSS) has a three-year lock-in period beginning from the day you make an investment, so it does carry certain limitations.
All the investments made under open-end schemes such as equity or debt are liquid assets that make withdrawal of your investment at any time easy and convenient since they do not have any restrictions too.
Is It Wise to Withdraw from Mutual Funds at Any Time?
It is not good to pull out your mutual fund investments until you have held them for a long time. Generally, there’s a basic rule of thumb that says you should stay invested in equity funds for four to five years if you want to have a bigger return at the end. A nice period for debt funds, on the other hand, is two to three years.
In case you invest long-term in mutual funds, they are better off undisturbed so as to allow them grow. Market fluctuations are normal in investing, and panic selling should not be an option. You can look at the history of your investments by using a mutual fund calculator and remind yourself about your main goals.
What Should You Consider When Redeeming Mutual Funds?
In an open-end scheme, a couple of things should be kept in mind when withdrawing mutual funds:
Keep track of the exit load. Normally such charges serve to discourage investors from withdrawing their money shortly after investing it.
It may also happen that all AMC’s may provide minimum amount for redemption. Therefore always ensure to get familiar with terms and conditions before picking any scheme for investments.
How to withdraw Mutual Funds?
It’s simple to withdraw mutual fund money; there are different methods of doing so, such as:
1. Getting assistance from a distributor or broker.
In case you have invested through distributors or brokers, contact them. To request for a withdrawal, you will need to fill out and submit request form.
Now, if your broker has online services available, then a mobile app or website may work too. Just sign in to the relevant app for initiating fund withdrawal requests. Enter the number of units that one wants to redeem and instantly the request will be processed.
2. Using Trading/Demat account
Log into your account to withdraw investments made using trading/demat accounts. Type in the amount or number of units you want to redeem then send a request which will verify your investments and once that is done, they will transfer it into registered bank accounts.
3. Using the Asset Management Company (AMC) for Redemption
Using this approach, you are able to withdraw money directly from the AMC. For offline withdrawals, go to their office and fill in all necessary documents. Alternatively, you can utilize AMC’s online services and redeem through its website or online app.
4. Through the Registrar and Transfer Agent
Such agents are registered under SEBI and they can also assist you in withdrawing funds. You may visit a nearby RTA or do it online.
What Happens After You Make a Withdrawal?
Once you have sent out an application for withdrawing or redeeming, updates regarding the withdrawal will reach you. After successful verification, the amount plus any deductions, if applicable, that were made will be in your bank account in three working days
In case the scheme closed completely, there would not be any exit loads applied since the unit will automatically mature.
Conclusion
You can generally withdraw mutual funds at any time, especially with open-end schemes, which offer flexibility in redemption. However, be mindful of specific conditions such as the three-year lock-in period for Equity Linked Savings Schemes (ELSS). It’s advisable to hold onto your investments longer to maximize returns—typically 4-5 years for equity funds and 2-3 years for debt funds. When withdrawing, consider potential exit loads and minimum redemption amounts set by the scheme. Withdrawals can be made through distributors, trading accounts, asset management companies, or registrars. Once your request is processed, the amount will typically be transferred to your bank account within three working days, subject to any applicable fees.