How to Switch Sip from One Fund to Another?

A systematic investment plan disciplines your savings. However, your SIP needn’t be towards the same mutual funds lifelong. If you feel that the fund no more caters to your investment objective, you have an option to make a switch.

What is Switching?

Switching is basically when you decide to move all or part of your investment from one fund to another. Most schemes will allow you to freely make a switch whenever you want, except in the case of ELSS or close-ended mutual funds, where switching can be permitted only after the lock-in period is over.

How to Switch?

Your SIP switch can be done online as well as offline.

Online Switching

• Log into your mutual fund account; at the Transaction page, choose ‘Switch.’
• Enter the amount to be switched and the fund’s name to which you would like to switch. After all mandatory details have been entered, submit the switching request.
• Your request is sent to the fund house for processing.
• For requests made before 3 PM, the NAV for the same day is applicable, and switching is done on that day itself. All transactions made after 3 PM will be done at the next working day’s NAV.
• You can then login to your account again to check the status of your switching request.

Offline Switching

• Visit the mutual fund house’s office and fill a Switch Request form with all your portfolio details and the fund to which you want to switch.
• Submit the form, and the mutual fund house will process your request and send the revised details of the new scheme to your contact details mentioned in the form.

When is the Right Time?

Switching can be done for multiple reasons. For instance, you realise that you no longer carry the same risk appetite that you did when you started the SIP and want to safeguard your returns now. This would entail a switch from equity-based funds to a hybrid or balanced fund. Or say you started a regular plan when you initiated your mutual fund investments but now have a better knowledge of the markets and would like to manage your portfolio actively. So, you then switch from a regular plan to a direct plan.

Things to Consider:

While SIP offers an option of making a switch, you might want to consider the following to validate your decision.

Exit Loads

If the scheme information document has a specified time duration mentioned, and you require to switch before that, exit loads might be charged. In case of a switch from a regular plan to a direct plan of the same scheme, exit loads can range between 0-2%, varying from fund to fund. Use the sip return calculator to check whether your returns from a scheme are still significant, even after paying the load.

Tax Liabilities

Switching across fund houses means that you redeem the source fund units and then buy those of the target fund. This might entail capital gains taxes if the switch is made within a year. Similarly, there are other specific rules related to various types of mutual funds. It is crucial to understand them before hurrying your switch decision. To make accurate calculations of your returns from a scheme, a mutual fund sip calculator comes in handy.

So, switching mutual funds is an easy process, but whether to make that switch or not must always be decided after considering the expenses that come along.