Cut-off time for mutual funds

Cut-off time for mutual funds

FINANCE

The term cut-off time in mutual funds online is not the same as it is for stock markets. The cut-off time in mutual funds is a mechanism that helps determine the net asset value (NAV) or the price of the unit for buying or selling purposes. Read on to know how this works.

What is the cut-off time?

The NAV of your mutual fund units depends on the time when you submit your application and invest your money in the fund house. This time is known as the cut-off time and impacts the NAV that is allotted to you. So, depending on the type of fund and the time you submit your application, you could receive the NAV of the previous day, the current day or the next day.

How does the cut-off time work?

The NAV is an indicator of the mutual fund’s performance. It changes every day as per the market value of the securities. Therefore, it is announced at the end of the day after the markets have closed. So, the cut-off time will determine the allotment of NAV, which in turn will affect your profits.

The cut-off time for mutual funds is different from equity funds, debt, funds, and liquid funds.

  • Liquid funds: The cut-off time for the purchase of these mutual funds is 1:30 PM. So, if you transfer money and submit your application before1:30 PM, you will receive the previous day’s NAV. However, if you invest your money after 1:30 PM, you will be given the same day’s NAV. The cut-off time for liquid funds for redemption is 3 PM.
  • Equity and debt funds: The cut-off time for the subscription as well as redemption of these mutual funds online is 3 PM So, you need to submit the application and transfer the money before 3 PM to get the same day’s closing NAV. If you submit it later, you will get the next day’s NAV.

What are the new rules for the cut-off time for mutual funds?

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Before February 1, 2020, the cut-off time did not apply to investments up to Rs 2 lakh. However, as per a new rule, the exemption for investments up to Rs. 2 lakh has been removed for all types of mutual funds.

How is the cut-off time important for investors?

Although the cut-off time does not impact small investments, it can impact the profitability for investors trading with large sums of money. If your SIP is not debited in time, you can receive the same day or the previous day’s NAV, which can greatly alter your profits depending on the market.

To sum it up

It is important to keep track of the NAV value of investments so that you know the right time to invest. Use Tata Capital Moneyfy app that can help you track this and simplify your investment experience.

 

         

 

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