You need to understand what redemption is. Fixed income securities offer investors regular fixed payments of interest. The payments and interest are known in advance. When fixed-income securities mature, they are redeemed at par value. Securities can be redeemed at the time of maturity or prior to maturity. Redemption value is the price paid to the investor when the issuing company repurchases the security either before or at the maturity date.
When called bonds are redeemed, they are redeemed at a price above par value. If an investor has not held a fund for the assigned holding period, he may incur a redemption fee. Additionally, the investor may be required to pay a back-end load, which is the deferred sales charge. Back-end fees are equal to a percentage of the value of the share being sold. Back-end loads decline over time and usually disappear if the investor has held the fund for five years or longer. When it comes to preferred stocks, investors have an additional layer of protection.
If the company can no longer meet its financial obligations, preferred stockholders can claim assets before common stockholders. Preferred stock is issued at par value. It pay set dividends at regular intervals.
Investors typically redeem preferred stocks within a few dollars of their issue price. However, an active investor tracking the market might sell off or redeem units, if the long-term prospects seem negative.
However, as per a CRISIL report, the chances of a fund providing excellent returns increase when invested with a long-term horizon. One should not sell just because the markets have touched new highs.
You must not sell just because of the recent market developments that brought the NAV of mutual funds down. Financial planners believe it is not possible to time the markets for any investor. Hence, redeeming immediately after a new market high might not be a good idea. If your scheme seems to be under-performing for a while now, then you should scrutinise the reasons for its under-performance.
If the cause was something like a change in the objectives or a drastic shift in the portfolio mix which is not in line with your objectives — then you might consider fund redemption. Investors should consider staying invested for as long as possible to reap the maximum returns on their investment.
This ensures liquidity. One should avoid selling off funds that are built to meet a particular goal. Also, be mindful of the tax implications and exit loads that apply when redeeming your mutual fund units.
One should invest with a longer investment horizon to reap maximum benefits from flexible funds. The underlying aim of the investment should always be wealth creation, capital protection, and appreciation. Do not let any other factors guide the redemption decisions. In short, one should invest with a longer investment horizon to reap maximum benefits from flexible funds. Therefore, the underlying aim of the investment should always be wealth creation, capital protection and appreciation.
By following the steps mentioned below, you can redeem the fund units on the Black by ClearTax app:. If not, select e number of units you wish to redeem. Start investing now or. Download link sent. Start Investing Now. What is NPS? Tax Saving Made Simple. Start Tax Saving. Was this article helpful?
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