Can mutual funds be withdrawn anytime?

The short answer is Yes. However, there are some restrictions based on the type of fund. For example, ELSS funds cannot be withdrawn within 3 years. We will discuss them in detail in this article.

How long does it take to withdraw a mutual fund?

The redemption period varies between the category of funds.

• Liquid funds: 1-2 working days.
• Debt funds: 2-3 working days.
• Equity funds: 3-5 working days.

The withdrawal amount will be credited directly to the bank account you have registered with the broker or mutual fund company (AMC) while starting your investment.

Note that withdrawal is processed during working days and do not keep your entire emergency funds in mutual funds (liquid/debt) since an emergency can happen during weekends too.

ELSS funds cannot be withdrawn at any time

Equity Linked Savings Scheme (ELSS) cannot be withdrawn within 3 years from the date of investment.

You may ask, why there is a lock-in for ELSS funds. This is to instill discipline in investors and they will not rotate money whenever they want and will be able to enjoy the benefits of long-term investing.

Can I get a loan against the ELSS fund?

No, you cannot pledge or avail loan against your ELSS mutual fund.

Exit load when withdrawing within 1 year

When you withdraw equity mutual funds or hybrid funds, you will have to pay an exit load (typically 1% of the investment amount if you withdraw within 1 year). The exit load varies from fund to fund.

Typically, debt and liquid funds will not have any exit load.

To learn about the taxes involved in mutual fund investments, you can read this article.

Why you should not withdraw mutual funds at any time

It is not a good habit to withdraw equity mutual funds whenever you want. If the market is in a bearish phase and you exit your investments, then the chances are high that you might have to book losses or would fail to beat inflation, thus failing the purpose.

Even debt funds have cycles that are determined by the interest rates and inflation. So it is not ideal to keep your emergency fund in debt funds. There can be scenarios where you will end up withdrawing debt funds with far lesser returns than Fixed Deposits.

It is absolutely fine to withdraw liquid funds at your will, hence the name ‘liquid’.