Investors often invest money in various securities anticipating the future financial needs and their most preferred option is usually the mutual funds. 

Mutual funds, particularly open-ended schemes, provide investors with liquidity and flexibility. This liquidity feature increases the accessibility of invested money when uncertain emergencies or planned expenditures arise. 

Upon redemption, the investors will receive the money in their bank account within one day to 3-4 days, depending on the type of scheme they invest in. 

Investors need to know all these factors before redemption (withdrawal). This article will answer the question of easing the money withdrawal process from the mutual fund. 

What Does Withdrawing Money from a Mutual Fund Mean?

To receive the money, investors should redeem their mutual fund units, which means liquidating or selling their investments. It is called redemption in mutual funds. 

Simply put, when investors want to withdraw the money, they mean to redeem the units. 

How Can You Withdraw Money from Mutual Funds? 

There are two modes through which the money can be withdrawn – offline or online. 

How to Withdraw Money from a Mutual Fund Offline? 

This mostly involves filling out forms and handing them to the related agencies. There are three ways to do it offline- 

1. Through a registered broker 

Investors can contact their brokers for withdrawal. A withdrawal request form has to be filled out and submitted to the broker. The broker will pass it on to the asset management company. 

2. Through an AMC 

In this case, investors/holders should sign a Redemption Request Form. The money will be credited to the first-named holder’s registered bank account.

3. Through a transfer agent or registrar

Investors can submit a withdrawal request to the related transfer agent and registrar locally. 

How Do You Withdraw Money from Mutual Funds Online? 

If investors want to avoid the physical hassle, they can withdraw the money online. 

1. Through the mutual fund website

Investors can log in to their preferred fund’s website, using their folio number and/or PAN. Then select the scheme and number of units they want to redeem, confirming the transaction. 

2. Through a demat account 

Investors can do this in their demat account. They can select the fund, and give a redeem option, and the funds will be transferred into the bank account. 

Exceptional Situations in Withdrawing Money from Mutual Funds

Though the normal timeline is from 1 day to 3-4 days, there are some unexpected situations and during these days, the payout timing will be different or a bit delayed.

Here are the six exceptional cases an investor might face while withdrawing money from mutual funds-

1. An additional two working days will be taken to process the fund when the redemption proceeds are credited through a cheque or a DD if the investor is uncomfortable with electronic transfer. 

2. The redemption is delayed by 1 working day if the payout schedule of the underlying funds is different, like overseas funds or overseas FOF funds. 

3. An additional 1 day will be taken if it’s a bank holiday in some states but a working day for the stock exchange. 

4. If a business holiday is declared suddenly due to unexpected reasons, like a prominent person passing away, the redemption might be done as per the SEBI circular dated November 25, 2022. 

5. If an investor requests to change the bank account just 10 days before the redemption request, the transaction will happen after 10 days. 

6. An additional 3 working days will be taken when the investor needs additional due diligence because the transmission is reported in one fund and not in the current fund as per the income tax authorities. 

How Much Money will Investors Receive from the Fund? 

It depends on the applicable NAV that prevails on the date of withdrawal. It is as follows-

  1. If the redemption transaction is received before 3 pm of a business day, the NAV of the same day will apply.
  2. If the transaction happens after 3 pm, the NAV of the next working day will apply.

Can I Withdraw Money from a Mutual Fund Anytime?

If it is an open-ended fund, then the answer is yes. 

Open-ended funds are known for offering flexibility and liquidity. Under this type of fund, the investors can take their money without any specific constraint. Even if it is a years-long investment, investors can redeem their money whenever they need it. 

But if it is a close-ended fund or an ELSS, there will be a mandatory lock-in period. For an ELSS fund, the lock-in period is three years. 

What Affects the Returns of Mutual Funds?

Even in case of urgent money requirements, investors still have to understand that the money they will receive will differ according to various factors- 

Type of fund

There are different types of mutual funds, among them, some might have a fixed maturity. 

Lock-in timeline

An ELSS fund has a 3-year lock-in timeline. Likewise, solution-oriented schemes might have a higher lock-in period. Investors cannot take the money before the lock-in period ends. 

Exit Load

If the units are redeemed before the specific term, the investor has to pay an exit load. This load is assessed on the NAV value that prevails during the redemption, and it might directly influence the portfolio returns. 

Holding period of mutual fund

Each mutual fund has a different holding period. Based on this, Short-term capital gains (STCG) and long-term capital gains (LTCG) are imposed. Usually, the LTCG is lower than the STCG. 

The aim is to encourage investors to hold the mutual fund for long. 

Conclusion

Investors can withdraw their money both offline and online, just remember these exceptional days in case the payment is delayed. 

The withdrawal and the money that investors will get depend on factors and the reason for withdrawal can be for emergencies or investors’ financial goals. 

Mutual funds can be of great help in situations where investors need an emergency and immediate source of cash.