Closure vs Redemption of SIP in equity mutual fund

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Closure vs Redemption of SIP in equity mutual fund
If you have an SIP (Systematic Investment Plan) running with investment in equity mutual fund, there exists a difference in respect of redemption and closure of the active SIP account. In case you wish to redeem all existing units and want the SIP account to be closed all together you have to take a different course than when you wish to withdraw or redeem the held or existing units and still continue the subscribed plan. Know about points to remember in a SIP.

For closure of the SIP account when you wish to redeem all the held mutual fund units and stop further SIPs, you need to place the request for stopping future SIPs in writing with the concerned mutual fund house. The fund house then will coordinate with the bank and stop your SIP within one month's time period. And, when once the process gets completed from the end of the mutual fund house, it will give you a confirmation regarding the closure of the account. It is then you can place a request for the redemption of all the existing plus newly added units (in case the request for stoppage of SIP was placed just few days before the SIP date or at a later date than the due date for SIP) and realize the proceeds upon closure of the account.

In the other case, when you wish to continue the SIP account even after withdrawing all the existing mutual fund units, you should place the request for redemption. As in the case, it is presumed, that the investor only wishes to redeem the existing units. So, with the request for redemption in place, investor realizes the amount due in respect of the held units while still maintaining the SIP account that on the next SIP date credits mutual fund units into your account and debits the payment for the SIP from the bank account.

Read more about: sip, mutual funds, bank
Story first published: Tuesday, January 14, 2014, 11:58 [IST]
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