Your Mutual Fund Action Guide: Getting In, Out, and Moving Around!

Getting In and Out

Your Mutual Fund Action Guide: Getting In, Out, and Moving Around! Hey everyone! So, we've already chatted about what mutual funds are – your cool way to team up with other investors and grow your money. Now, you might be wondering, "Okay, how do I actually do things with these mutual funds?"

Think of your mutual fund investment like having a special box of goodies. There are different things you can do with this box, and that's what we're going to explore today!

1.Getting Your Goodies: Purchase (Buying)
Imagine you've decided you want a piece of this awesome "mutual fund chocolate cake." A purchase, is simply you putting in your money to get your slice (or in mutual fund lingo, your units).

Think of it like: Buying a ticket to a concert or paying for your share of a pizza with friends. You put in your money, and you get something in return – in this case, units in the mutual fund. How it works: You decide how much you want to invest, and based on the current price of one unit (called the Net Asset Value or NAV – think of it as the price of one slice of cake), you get a certain number of units.

Units = Amount / NAV

If this transaction happen Once we call it Lumpsum. If you buy at regular Intervals they call it SIP.

2.The Regular Treat: Systematic Investment Plan (SIP)
Imagine you love having a little bit of chocolate cake every week instead of buying a whole cake at once. That's what a Systematic Investment Plan (SIP) is like, a buying process.

Think of it like: Setting up a recurring order for your favorite snack every month. How it works: You decide on a fixed amount (even as small as ₹100!) and a regular interval (like monthly / weekly / Daily). This amount automatically gets invested in your chosen mutual fund. It's super handy because it helps you save regularly without feeling a big pinch, and it also helps you buy more units when the price (NAV) is low and fewer when it's high – a smart way to average out your purchase cost!

3.Cashing Out Your Goodies: Redemption (Sale)
Sometimes, you might need to get some money back from your investment. Redemption, or sale, is when you decide to sell some or all of your "chocolate cake slices" back to the fund.

Think of it like: Selling your concert ticket when the demand(Price) goes up, that happened in Cold Play concert. How it works: You tell the fund how many units you want to sell, and they pay you back based on current NAV.

4.Getting Regular Pocket Money: Systematic Withdrawal Plan (SWP)
Now, imagine your "chocolate cake" has grown really big over time, and you want to enjoy a little bit of it regularly as pocket money. That's where a Systematic Withdrawal Plan (SWP) comes in.

Think of it like: Setting up a regular transfer from your savings account to your spending account. How it works: You tell the fund how much money you want to receive at regular intervals (like every month). The fund then sells enough of your units to give you that amount. This is often useful for people who need a regular income after retireme

5.Moving Your Goodies Around: Systematic Transfer Plan (STP)
Sometimes, you might have different kinds of "chocolate boxes" (different types of mutual funds within the same company). A Systematic Transfer Plan (STP) lets you move a little bit from one box to another regularly.

Think of it like: Deciding to move a few of your plain milk chocolates to a box of more exciting dark chocolates every month. How it works: You set up a regular transfer of a fixed amount from one mutual fund scheme to another within the same fund house. For example, you might want to gradually move money from a safer "debt fund" to a potentially higher-growth "equity fund" over time

6.One-Time Goodie Swap: Switch
Similar to an STP, a switch is also about moving your investment from one mutual fund scheme to another within the same company. However, this is usually a one-time decision, not a regular thing.

Think of it like: Suddenly deciding you want to trade all your milk chocolates for white chocolates in one go. How it works: You request to sell all or some of your units in one scheme and use that money to buy units in a different scheme from the same fund house. You might do this if you think a different type of fund will perform better. Important Stuff to Remember:

Sometimes, there might be small fees for buying or selling, so always check the details of the fund. If you sell your units too soon after buying them, some funds might charge a small "exit fee." So, there you have it! Buying, selling, and moving your money around in mutual funds is all about these different types of transactions. Just think of your investments as your box of goodies, and these are the ways you can manage and enjoy them! Happy investing!

AUTHOR - Aparna Rao