Mutual Funds: How to Switch Schemes

In an effort to gain better returns or mitigate risk, an investor could consider switching their mutual fund investment from one open-ended scheme to another within the same asset management company (AMC) or fund house.

Simply put, switching involves the process of moving from one mutual fund scheme to another.

It is also possible to switch fund houses as well. An investor would require redeeming their units from the existing AMC or fund house and buy units from the new fund house in which the investor plans to switch.

Switching Mutual Funds: Online Mode

• First, log in to the demat (dematerilised) account that holds the units of mutual funds to be switched
• Once on the transaction page, an investor can suitably redeem, purchase, or switch mutual funds. Next, choose the switch option and the new plan opted for.
• A request for plan change will be received by the fund house
• An investor should check the status of the mutual fund switch after a couple of days

Switching Mutual Funds: Offline Mode

While switching the scheme within the same AMC or fund house, an investor is required to fill up a transaction switch form mentioning the amount or the number of units to be switched from the source scheme and the name of the target scheme

An investor must fulfill the minimum investment amount criteria in the case of both switch-in and switch-out schemes. There is a need to consider exit load and capital gains tax while switching. There is no need to worry with regard to the settlement period while initiating a switch within the same fund house.

An investor switching from one mutual fund scheme to another is akin to selling investments in one fund and re-investing in another. An investor can apply for redemption from the first mutual fund and wait until they receive the amount in their bank account.

Fill out the application form for the mutual fund where an investor wants to reinvest the proceeds once they get back the credits from the first mutual fund scheme. It is always better to reach out to a professional financial expert while initiating any step to switching funds.

• An investor must complete the minimum investment period in an open-ended mutual fund scheme to avoid an exit load
• Apply for the redemption of the amount or number of units from this particular open-ended fund scheme
• Wait for a few days to receive the redemption proceeds in the bank account
• Once the credit is received, fill out the application form for the new mutual fund scheme to reinvest the proceeds
• Pay short-term capital gains (STCGs) tax or long-term capital gains (LTCGs) tax for the earlier open-ended mutual fund scheme, if required
• Also, ensure to include the taxes mentioned above during filing of the returns