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A mutual fund is closed because it is believed that closing a fund will protect the fund’s performance by preventing it from becoming too so that it is difficult to manage it conveniently. The closed funds that have been closed will not accept any money from new investors and operate only with the current assets and new investments from existing shareholders. It is usually seen that people invest in mutual funds for long term benefits. If it so happens that the mutual fund you have invested in is not performing well, then you would certainly want to close that mutual fund. However, it is quite easy to close a mutual fund.
Procedure for Closing a Mutual Fund Account
The first and foremost thing that you should remember while closing a mutual fund account is the fees associated with it, the penalty charges and the tax considerations related to it. This will help you in analyzing whether you are making a right decision by closing the account. In simple terms, if you want to close your Mutual Fund account, you just need to just redeem all the holdings of your account.
Procedure for Cancelling a Mutual Fund Account
If you are intending to cancel your Mutual funds, you just need to submit your redemption request along with your PAN copy to the fund house that you had chosen while investing in Mutual Funds.
Points to Keep in Mind While Closing a Mutual Fund Account
There are few important points that are to be considered while you are planning to close the Mutual Fund Account.
- It is critical to look for the deferred sales charges and back-end fees correlated with the mutual fund that you are willing to close.
- Counterbalance the advantages and disadvantages of closing the account. This relates to knowing the best and suitable time to close the mutual fund account. The suitable time to close the account would be decided by coming to a conclusion as in whether it’s better to close the account now or wait for a certain period to close the account.
Steps to Close a Mutual Fund Account
Closing a Mutual Fund Account is pretty easy if the following steps are followed.
- The first step is to go to the broker through whom you had opened the account and fill up the form provided to you by them.
- It is advisable to ask the fund company to provide you with the copies of the information related to the account closure because it is usually seen that the fund company’s dispose-off account closure information.
Sample Letter for Closing a Mutual Fund Account
The Fund Manager
Subject: Closure of Mutual Fund Account
Respected Sir/ Madam
I have a Mutual Fund Account with the Account Number: I need to close this account at the earliest. Kindly close the account.
I would also like to request you to provide me with a written confirmation letter that my Mutual Fund Account has been closed.
In case you have any queries related to my Mutual Fund Account, please contact me at this number and email id .
The most common reason for a mutual fund account is to be closed is when the strategy of the fund is threatened by the size of the mutual fund. It is also observed that Open-ended funds can also be closed if there is a plan for reorganization. The easiest ways to close a mutual fund account in a simple and feasible manner is by taking the aid of Credit advisory services of Creditseva and stay creditworthy. You just need to sign up, fill in your basic details and receive detailed as well as holistic insights of your credit-related data and thus maintain, improve your credit score in an easy and simple manner.
Mutual Fund Redeem Units FAQs:
1. What happens to an MF Account if a trading account is closed?
If a trading account is closed, you would have a separate Mutual Fund account for all your Mutual Fund investments.
2. What is the effect of closure on the performance of a mutual fund?
It is quite difficult to predict the effect of closure on the performance of a fund. However it is seen that few closed funds perform in a laid down manner after the mutual fund account has been closed.
3. What has to be done immediately after closing a Mutual Fund Account?
Immediately after you have closed the mutual fund account, the mutual fund companies discard off your details and record. In order to keep a track of your records, you need to keep safe with you the date of purchase of your fund, the date you have sold it, and the amount that you had paid towards the tax return in case your fund is a non-IRA account. You can take a print copy of these details and keep them safe with you.
4. What is the right time to close a Mutual Fund Account?
The best thing to do before closing a mutual fund account is to wait for some time because the market is sometimes upward and sometimes downward. It is better not to close your mutual fund account if you are not in urgent need of money.
5. What is the reason for a mutual fund to close to new investors?
The main reason for a mutual fund to close to new investors is to allow the fund managers to keep continuing with their original investment style and pattern.
6. What actually happens when you close your Mutual Fund Account?
When you opt for closing your Mutual Fund Account, the following things happen actually.
- Firstly, your Mutual Fund account does not actually get closed.
- It actually becomes inactive if there is no more holding in the account.
- This will not have any negative impact on you because there is no annual fee if your account has no minimum holding.
7. What will happen if a channel partner for your mutual funds is closed down?
There is no effect on your mutual funds if something like this happens. The channel partner is not responsible for your Mutual Funds directly.
8. Are there any charges for closing a Mutual Fund Account?
There are no charges if it is an open-ended fund. In Case of closed-end funds, there are certain charges that are applicable.
- Loan Closure
- Debit Card Closure
- Credit Card Closure
- Secured Credit Card Closure
- Salary Account Closure
- Savings Account Closure
- Redeem Mutual Fund Units
- Close Fixed Deposit