Switch in Mutual Fund – Meaning, Rules, and How to Switch

Mutual funds have long been one of the most popular investment options. Seasoned investors and novice ones alike invest in them due to the automatic diversification they offer and the benefits of professional management, customisability, and liquidity.

That said, you might find yourself wishing to switch mutual funds. This could be for a variety of reasons, such as a change in fund manager, realigning your portfolio with investment goals, underperformance of the current mutual fund scheme, or even simplifying your portfolio.

If you’re wondering if it’s possible and how to go about it, keep reading this guide to switching to mutual funds.

What is a Switch in Mutual Fund?

Switch in mutual funds involves transferring your investment from your current mutual fund scheme to another within the same fund house or another. This can be prompted by the underperformance of the current mutual fund, a change in mutual fund manager, a desire to realign with investment goals, or even to simplify the portfolio for easier management.

Rule to Consider When Switching Mutual Funds

If you’re considering switching mutual funds, be sure you adhere to the following guidelines for a seamless process:

• Ascertain Switch Type: Decide whether you want to switch within the same mutual fund scheme or to a completely different one.
• Confirm Requirements for Switch in Mutual Funds: Confirm that you satisfy the minimum investment criteria for an intra-scheme switch.
• Determine the Cost of the Switch: Analyse the possible exit load charges, which refer to the percentage of the Net Asset Value (NAV) deducted by your current fund house if you exit before a specified period.
• Begin Inter-scheme Switch: Sell your existing mutual fund and apply for redemption.
• Consider Tax Implications: Analyse your mutual fund capital gains tax.
• Analyse Lock-in Period: Analyse any lock-in period which could restrict your ability to switch in mutual funds.

How to Switch Mutual Funds

You can switch mutual funds online or offline. Here are the steps for both:

• Online: Log in to your personal mutual fund account (through the fund house’s website or third-party platform such as Tata Capital Moneyfy) and navigate to the transaction page. Click on the ‘switch’ option and select the fund name and the plan you want to shift to. Follow the instructions on your screen and complete the process. You will be notified once the switch is successful.
• Offline: Visit the nearest branch of the fund house and complete the switch form. Provide details, such as portfolio number, fund name, etc., of the fund you want to shift to. You can switch mutual funds through an agent, broker or any other intermediary as well.

Final Thoughts

A switch in mutual funds is a smart investment decision if you find your current mutual fund underperforming, wish to realign your portfolio to investment goals or are just looking to simplify your portfolio for easier management. That said, be sure to consider the rules of switching in mutual funds before making a decision.

If you’re seeking a reliable financial partner for your investment journey, consider Tata Capital Moneyfy. Your one-stop-shop for everything financial, Tata Capital Moneyfy helps facilitate investments, loan applications, and more.

To learn more about our offerings, visit the Tata Capital website today!