Monday, April 24, 2017

When do the investments in mutual funds mature?

What is the maturity date of my mutual fund investments? When can I get the money? Read my article in Mid-day Gujarati edition today:

What is the maturity period of mutual fund investments? Can I withdraw on a premature basis? How?

The English translation is as under:

What is the maturity period of mutual fund investments? Can I withdraw on a premature basis? How?
In some of our earlier article, we have covered the two chief varieties of mutual funds – open-ended funds and close-ended funds. While the latter have a defined maturity period, the former does not have.
The close-ended funds mature on a pre-decided maturity date.
Each scheme may have a different maturity period, just like in case of fixed deposits. The fund house would not encourage any redemption request prior to the maturity period. In other words, there is no premature withdrawal facility in case of close-ended funds. At the same time, on maturity, the investor would get the money back. The scheme cannot hold the investors’ money after maturity of the scheme.
The regulator has made it mandatory for the units of all close-ended funds to be listed on at least one recognized stock exchanges. This is in order to offer an exit route to investors before the scheme’s maturity. However, the trading volumes are very low and hence, though the facility exists, one cannot really get out of a scheme through the stock exchange mechanism. In that case, one should invest in close-ended funds only to the extent of money that can be kept under lock-in.
Open-ended funds are perpetual investment vehicles, in that there is no defined maturity period. Very simply, since there is no maturity period, there is no question of a premature withdrawal. In that case, how and when can one withdraw money from an open-ended fund? Well, simply by filing a redemption request for the amount required, i.e. partial or full, one can take the money out of a scheme on any business day.
First of all, the redemption form is a simple one that requires the investor to fill in the scheme name, folio number, amount (or units) to be withdrawn and put a signature.
If you are transacting electronically, i.e. through website, mobile app or through on of the industry platforms, you do not need to fill up or sign any redemption form. This means, you need not put your signature, but there could be password protection. All the other details like for folio number, etc. must be provided.
One has to take care of the exit loads and taxes. Some schemes may have an exit load if the investment is withdrawn before a certain time period. The taxes depend on the type of the scheme and when one is taking the money out.
The procedure is really very simple and offer great convenience.


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