5 Things to do if you have invested in Regular Mutual Funds

We have established in our earlier article that Direct Mutual Funds are better than Regular Mutual Funds as they generate higher returns than the latter due to the absence of commissions. Also, we listed out simple ways to identify if you are investing in a Regular or Direct Mutual Fund. In this article we will talk about the further steps that you can take if you identified your investments are in Regular Mutual Funds.

Below is a list of things that you should do if you invested in a Regular Mutual Fund:

1. Stop ongoing SIPs:
   If you have active SIPs in any Regular Mutual Fund, make sure that you stop them immediately and start these SIPs in the Direct option of the same scheme. This would ensure that you would not be paying any commission on your fresh investments. As the fresh investments will be going into the Direct plan, these will earn higher returns than the Regular option.
2. Exit Load:
   Many Mutual Funds have a straight or graded exit load implication associated with them. For example, most equity mutual funds have an exit load of 1% if redeemed before one year. So, in case you redeem your investments before the exit load free period, the AMC (Asset Management Company) can penalise you by deducting the exit load from your accumulated corpus. Identify if your investments will have any exit load impact.
3. Tax implications:
   Capital gains earned on your investments are subject to short term or long-term capital gains taxation as per the asset class you have invested in. Make sure to assess your total tax liabilities.
4. Switch:
   Once you are through with the above-mentioned steps, make sure to ‘Switch’ your investments to Direct plans. Switch is an operational feature which lets your transfer your investments from one plan/option/fund to the other within an AMC seamlessly. As switch involves redemption from one fund and fresh investment into another, so it is highly probable that you might have to bear some exit load and capital gains tax.
   If your exit load and tax implications are minimal then switch your investments immediately. If your investments are long term in nature, then also it is advisable to go ahead and switch your corpus to Direct options. This is so because the exit load implications will be more than compensated by the higher returns generated by Direct plans over the long term.
5. Lock-In Funds:
   Do remember that if you have some lock-in funds like tax saver, retirement funds etc. in your portfolio and they have not completed their lock-in period, then you will not be able to switch them. Even in this case, stop any continuing SIP and make sure that the fresh investments go into the Direct option. Once the lock-in period is completed, you can freely switch these investments as well. Same applies to close ended funds.

Paytm Money is now offering switch feature. This will help you track all your mutual fund investments at one place and also help you earn higher returns on your investments by letting you switch from Regular Plans to Direct Plans. Download your CAS and upload it on our app to switch your investments.

Thinking of investing in Mutual Funds? Go the Direct way and invest through Paytm Money!