Each SIP installment is fresh purchase; check exit load when redeeming

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Published: July 17, 2019 12:59:56 AM

If one is investing Rs 1,000 through monthly SIP in a fund that charges an exit load of 1% for holding period less than one year and now wants to withdraw towards end of two years, then investments made in the first 12 months will not attract exit load. Investments made after 12 months will attract the 1% exit load.

SIP,  SIP installment, KYC, Aadhaar number, education loan, loan, personal loan, savingsInvestments made after 12 months will attract the 1% exit load.

Each SIP instalment is fresh purchase; check exit load when redeeming
> I plan to withdraw some money from my SIP investments. What is the process and do I have to pay any penalty?
– Kunal
There is no penalty for withdrawing from a fund in which one is investing through SIP mode, as SIP and withdrawal (redemption) are two separate mandates. However, exit load may be charged for redeeming before a stipulated period. In case of investment through SIP, every instalment is treated as fresh purchase. Thus, the exit load charged will depend on the holding period of each instalment. If one is investing Rs 1,000 through monthly SIP in a fund that charges an exit load of 1% for holding period less than one year and now wants to withdraw towards end of two years, then investments made in the first 12 months will not attract exit load. Investments made after 12 months will attract the 1% exit load.

> Is there any requirement to give KYC related documents every year to the mutual fund company?
—Vikas Kumar
Fulfilling KYC requirements is a one-time activity. Once it’s is done through a Securities and Exchange Board of India (Sebi) registered intermediary like mutual fund company, broker or depository participant, one does not have to repeat it while dealing with another Sebi registered intermediary. However, if Sebi or the government stipulates any changes in the KYC norms, the investor would need to fulfil those requirements. For e.g. , updating Aadhaar number is now mandatory, hence one would need to provide the details to the existing intermediary.

> I want to build a corpus for my son’s higher education. Can I invest in an equity mutual fund in the name of my son who is 10 years old?
—Pramod Apte
Yes, you can invest in a mutual fund in the name of your son. He would become the first and the sole holder of the folio. The guardian of the folio should be a parent (or a court-appointed guardian). You need to provide your son’s date of birth and age and a copy of proof of age. You also need to provide documentary proof of the relation between you and your son. The guardian would need to be KYC compliant. Once your son attains the age of majority, i.e., 18 years, control of the guardian over the folio would freeze. Your son would need to fulfil the KYC requirements.

The writer is director, Investment Advisory, Morningstar Investment Adviser (India).
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