How to redeem your investment

Redemption is simply selling your units back and receiving the money. It is more straightforward than most people expect, but there are three things worth checking before you do it.

The process

You place a redemption request for some or all of your units. The units are sold at the applicable NAV, and the proceeds are credited to the bank account registered in your folio.

You can redeem partially — there is no requirement to exit the whole investment because you need part of it.

Proceeds go only to your registered bank account. That is a protection for you, not an inconvenience.

How long it takes

For most open-ended schemes the money reaches your bank within a few working days of the request being processed. The exact timeline depends on the scheme type.

As with purchases, cut-off timings matter: a request submitted after the cut-off, or on a non-business day, is processed on the next business day.

Three things to check first

1. Exit load. Some schemes charge a fee if you redeem within a specified period after investing, deducted from your proceeds. It is disclosed in the scheme documents. Check it particularly on a recent investment.

2. Lock-in. Most open-ended schemes have none. Certain categories, such as tax-saving schemes, carry a statutory lock-in that cannot be waived by anyone.

3. Tax. Redemption is normally the point at which capital gains tax arises. With a SIP, each instalment has its own holding period, so a single redemption can contain both short-term and long-term gains at once. Worth calculating before, not after.

If you are redeeming because markets fell

This is the one case where we would ask you to pause and talk to us first — not to talk you out of it, but to make sure the decision is the one you actually want.

If you need the money, redeem it. That is what it is for, and nobody should make you feel otherwise.

If you are redeeming because a falling market is uncomfortable, that is a different decision, and it is worth being clear with yourself about which one you are making. Selling during a decline converts a temporary fall into a permanent one.

Switching is not the same as redeeming

Moving between schemes, or between a direct and a regular plan, is generally treated as a redemption from one and a purchase into the other — even though no money reaches your bank.

That means exit load and capital gains tax can apply to a switch. It catches people out regularly.