According to the Securities and Exchange Board of India (SEBI), every mutual fund scheme issued by Asset management company comes in two varieties : regular and direct funds. Both of them have their own benefits and drawbacks. Let’s Discuss how to switch mutual funds in details.
What is Switching Mutual Funds?
Each mutual fund requires a unique investment approach. There may be instances when a fund isn’t functioning well and the fund’s value drops, or you don’t want to risk it. In such cases, you might use the switching option. Let’s discuss how to do so within the same AMC or in the other AMCs.
How to Switch Mutual Funds?
There are different processes to switch the mutual funds from the same AMC and to other AMCs.
Switching Mutual Funds within the Same Company
For better financial planning, investors move their money from one open ended scheme to another within the same fund institution. Fill out a switch form giving the amount/number of units to be switched from the source scheme and the name of the destination scheme if switching within the same fund house.
For all switch-in and switch-out plans, you must meet the minimum investment amount conditions. While moving, there may be exit-load and capital gains tax consequences.
So because money does not leave the fund house, there is no need to bother regarding the settlement time for a transition within the same fund house.
Switching Mutual Funds between two different Company
It’s the same as selling one fund and reinvesting in another when you move from one scheme in Mutual Fund A to another scheme in Mutual Fund B. You can request redemption from the first Mutual Fund and then wait for the funds to arrive in your bank account.
When redeeming your investments, keep exit loads and tax implications in mind. Once you have received the credits from the first fund, fill out the application form for the Mutual Fund where you want to reinvest the income.
Fund advisors can also assist you in selecting the appropriate funds for a changeover.
When People Generally Switch Mutual Funds?
- If you wish to switch from debt to equity funds or the other way around.
- If you’re switching from a regular to a direct fund, here’s what you need to know.
- If you want to invest in a fund that would provide you better returns.
- If you’re looking to go from a growth to a dividend fund.
Originally published at https://profitmust.com on June 10, 2021.