What Are Instant Redemption Funds?

What if we were to tell you that along with earning substantial returns on mutual funds, you can also liquidate them within a matter of minutes? This feature can help you cover any sudden expense or reinvest funds into better performing mutual funds or other financial instruments.

Now, not all mutual funds you hold are instantly redeemable, but the ones that offer this facility, called liquid funds, are instantly redeemable. To heighten an investor’s liquidity within the mutual fund economy, certain liquid funds offer you a full or partial exit option that too quickly.

Is there a penalty on sudden redemption?

Typically, no penalty is levied on instantly redeemable liquid mutual funds. However, there are a few mandatory conditions under which you can quickly redeem liquid funds. For instance, only growth plans within special liquid schemes offer the instant redemption facility.

Another stipulation here is that you can instantly redeem up to Rs. 50,000 or 90% of the corpus invested in liquid funds. Say, if your total balance is Rs. 50,000, you are allowed a maximum instant withdrawal of Rs. 45,000.

Types of Instant Redemption

While you can instantly redeem liquid funds online through the website you used to book them, there are three ways to consider before doing so.

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Instant redemption based on the amount required

Knowing the amount of money you require can help decide how many units you want to redeem. Once you specify the amount worth of funds to instantly liquidate, the units are debited based on their present-day Net Asset Value or NAV. 

Instant redemption based on units

If you have a specific number of mutual funds you wish to liquidate, specify them at the time of redemption. In this case, the amount you will get back will be decided by the Net Asset Value or NAV of the mutual funds on that given day.

Liquidate all mutual funds

You can also choose to entirely liquidate your entire portfolio of liquid mutual funds. However, you may face taxation and other exit penalties as stipulated in your contract in such a case. To exit from all liquid mutual funds instantly, make sure to read the terms and conditions of your policy document before investing.

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Parting thoughts

It’s no secret that investing in mutual funds continues to prove fruitful for countless investors. However, there are times when you would want to quickly redeem them. For instance, it’s ideal to liquidate a fund that has been returning a below-par performance for a while. Further, you can instantly redeem liquid funds if you run into an emergency. Keeping these in mind, invest a chunk of money into liquid funds that are instantly redeemable.

Looking for a quick and convenient way to start your mutual fund portfolio? If so, then turn to Tata Capital Moneyfy app. We extend a user-friendly digital portal that showcases diverse categories of mutual funds which you can invest in instantly.

You can also indirectly start investing in mutual funds with a small amount by opting for SIPs on our portal. We offer SIPs starting at just Rs. 500 every month.

So, begin your investment journey with Tata Capital Moneyfy today!