Systematic Investment Plan (SIP) units redemption

We all invest in mutual funds.

Many of us who try to save our hard earned money from being taxed by  investing in Tax Saving Mutual Funds, with a lock in period of 3 years.

What is Systematic Investment Plan SIP?

SIP is a mode of investing in a mutual fund.

For example, You can invest Rs. 1,00,000 in any mutual fund of your choice, in two ways:  

• The lump sum way, where you buy units for a cost price of Rs. 1,00,000 in a single transaction.


• The SIP way, where you choose to buy units for a cost price of Rs 10,000 for 10 months i.e., in 10 transactions.

So in a way, SIP is similar to a Recurring Deposit. Every month on a specified date an amount you choose is invested in a mutual fund scheme of your choice.

People can choose the one that suits them the most or which they find less risky.

This is how you invest Rs. 1,00,000 through SIP:

Month	Investment Amount	Units Purchased
Jan,2011	Rs. 10,000	50
Feb,2011	Rs. 10,000	20
Mar,2011	Rs. 10,000	40
Apr,2011	Rs. 10,000	60
May,2011	Rs. 10,000	100
Jun,2011	Rs. 10,000	70
Jul,2011	Rs. 10,000	50
Aug,2011	Rs. 10,000	20
Sep,2011	Rs. 10,000	30
Oct,2011	Rs. 10,000	10

SIP units redemption:

Unlike other  mutual funds where units can be sold or redeemed at any point of time (not intraday), in Tax Saving mutual funds the units can be redeemed only after they have matured, i.e., after the lock in period of 3 Years.

This is how the units purchased through SIP will mature after a period of 3 years:

Month	Matured/Redeemable Units
Jan,2014	50
Feb,2014	20
Mar,2014	40
Apr,2014	60
May,2014	100
Jun,2014	70
Jul,2014	50
Aug,2014	20
Sep,2014	30
Oct,2014	10

 As a majority of the mutual funds are open ended schemes, you can choose to either stay invested or sell/redeem the matured units.

There are specific Unit Redemption forms for all mutual funds, mostly available on their website, where you need to fill in the redeemable units you wish to sell and submit at their offices.

Or

Most of the mutual funds have now come up with their online portals where investor can create account using their mutual fund folio no, login and do the buying/selling of units.

Copyright © 2011 randomchores.