How to Close a Mutual Fund? What are the Important Points to Remember While Closing?

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How to Close a Mutual Fund? What are the Important Points to Remember While Closing?

How to Close a Mutual Fund? An Overview

Mutual funds are one of the best financial investments accessible today, catering to a wide spectrum of clients. In contrast to stocks and other assets, investors regard mutual funds as a safe way to invest. Even if you prefer taking chances, you can diversify your funds by investing in a mutual fund that offers pretty safe returns.

When investing your capital in any market, it is fair to expect certain returns. This is entirely determined by your particular choices. However, if your mutual fund investments are yielding lower yields, you might well be tempted to close your fund's units. But, there are advantages and disadvantages to redeeming your mutual fund holdings. There are just a few situations in which liquidating funds may be favorable and somewhere it might just be an impulsive decision. Let us delve into understanding the same.

Top Reasons to Close Mutual Fund

There are several reasons why an investor could sell or exit the mutual fund units. Before you redeem hastily, it is advisable to take the following factors into account and understand the top 5 reasons to redeem or close your mutual fund.

  1. Basic Objectives of the Mutual Fund Scheme Have Changed: If the basic assumptions of the mutual fund scheme have considerably altered since you bought it, you might want to contemplate closing the mutual fund units. If the reasons or financial goals for which you purchased the fund no longer apply, you could think about closing your fund.  
  2. When the Manager of Your Fund Has Changed: Although this isn't a clear indication that you should sell the units in your fund, you should nevertheless proceed with care. Considering how important fund managers are to a scheme's performance, you should carefully research a potential fund manager's history and track record before making a change. This can help you determine if this is the time to start considering exiting the fund.
  3. When your Investment Goal has been Attained: The optimal time to sell your units is a few years before you meet your investing goals. Your investment approach won't be impeded by any unanticipated market volatility if you convert to a low-risk plan either one-two year before achieving your investing goal.
  4. When the Fund Was Inadequate: Typically, an investor purchases a mutual fund plan in order to generate income. However, if a plan hasn't generated income for some time, the investor could want to think about selling the units. Before deciding to sell your units, compare the plan with its benchmark, its category, as well as other high-return plans within the same category to get a better understanding of the fund's performance. By using this method, you may evaluate if the plan is doing poorly or whether the market or industry as a whole is going through a tough time.
  5. When Debt Funds are At Risk: When the Indian central bank (RBI) reduces repo rates, debt funds benefit from higher prices and lower bond yields. Debt funds frequently provide poorer returns as interest rates rise. In this instance, you should decide to discontinue your debt funds. When considering whether to liquidate the debt fund unit, you must look at the general trend of the RBI's evaluation of the repo rate instead of focusing on a single occurrence.

How to Stop Mutual Fund SIP?

You may choose to cancel your Mutual Fund SIP either online or offline.


  • If you purchased the units of a fund directly from the asset management firm (AMC), you can redeem them through their online portal. You can opt to sell part or all of the units, depending on your needs.
  • You would need to terminate the SIP through their mutual fund site account if you created a SIP with the help of an online agent.
  • You must redeem your units using the same account that you used to purchase the mutual funds, whether it was a trading account or a Demat account. An electronic payout (NEFT or IMPS) will be provided in response to the redemption request after the procedure is finished. The money will be sent to the same bank account that is linked to your Demat account.


  • Units can also be redeemed offline by approaching the AMC office. Following the processing of your request, you shall receive the redemption money by NEFT or a check issued to the registered office.
  • Mutual funds purchased from many AMCs can also be redeemed via central systems like CAMS and Karvy. Obtain a redemption form, fill it out, and deliver it to the CAMS office that is most convenient for you.

How to Close Mutual Fund Folio Temporarily?

You can give your bank an order such as "stop payment" if you want to temporarily halt your mutual fund SIP. Additionally, you are permitted to have a negligibly low amount in the savings account that receives your SIP payment. Your check or standing order will be turned down in this manner. You can notify your bank and mutual fund firm when you're ready to resume making SIP payments. You should be aware that the AMC will terminate your SIP if you issue the "stop payment" request for a duration longer than two months.

Important Points to Keep in Mind Before Closing your SIP

  • Your financial objectives determine the ideal moment to close or redeem from the mutual fund schemes. Regardless of the situation of the market, you ought to consider redeeming your fund units as soon as they are near to achieving their financial goals.
  • There is an exit load that you might have to pay when you redeem your units before a specified period of time. Investors make taxable capital gains when they redeem their units. The kind of fund and holding time affect whether capital gains are taxable. Investors are required to take into account all costs associated with redeeming their units.
  • Any momentary decline in the value of the stock market may be used as an entrance point, but only if you have additional cash. In such a case, refrain from delving into other financial goals or closing your units.
  • Many mutual fund experts believe that the current market turmoil is a great opportunity for investors to learn a lot about themselves. Investors assert that it gives them more general market knowledge as well. In fact, you will become a better investor if you can recall how the market behaved at various points in time. Simply don’t try to escape in haste.
  • Don't alter your investment approach every time you are urged to exercise caution. It only suggests that you should execute your ideas after carefully considering them and then take a call on whether or not to consider closing your SIP. 

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When making an investment, retail investors evaluate a variety of factors, including when to buy, when and how to buy, the amount to buy, and so on. However, an exit plan is a less often discussed topic. As a mutual fund investor, you should sell your assets after your financial goals have been met. Furthermore, while the goal is still two to three years away, you should begin withdrawing the money of equity-linked mutual funds and shifting it to safer investment options. 

It would be rather wise to calculate the amount of money you will need to set away as an investor to pay the asset value of your long-term objectives using a SIP calculator, and then devote funds in that direction. 

  • What is the most effective way to sell mutual funds online?

  • How long does it take to withdraw money from a mutual fund?

  • What time of day is ideal for selling mutual funds?

  • Is discontinuing SIP in the event of a merger or demerger a wise idea?