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Last Updated : Dec 13, 2016 01:35 PM IST | Source: Moneycontrol.com

Cut off times for mutual fund investments and its importance

It is possible to get the net asset value of the previous day too in case of liquid funds if the money moves into the account of the mutual fund by 2 pm while this facility is not present for other funds.

Arnav Pandya

There are cut off times that are important when it comes to mutual fund investments and redemption but many investors are not clear about the consequences of this. There can be a large impact of the actual date and the price that one is able to get when they invest or sell a mutual fund and this is highlighted by the cut off time. It is also not easy to know the details considering that there are different times and regulations for various types of funds. This means that the investor has to pay special attention and know the following things when they are looking at the cut off time.

Liquid funds and others

The first distinction that one needs to make when looking at the cut off time for dealing in mutual funds is that between liquid funds and other funds. In the remaining category both equity oriented funds as well as debt funds other than liquid funds are included. The nature of the liquid fund is such that there has to be instant movement of funds and hence there are different regulations that are present. It is possible to get the net asset value of the previous day too in case of liquid funds if the money moves into the account of the mutual fund by 2 pm while this facility is not present for other funds. The most that can happen is that the investor gets the net asset value of the current day in the other funds including equity funds and hence this needs to be known properly so that the investment can be made keeping these features in mind.

Time for cut off

The other difference that will be witnessed when the various types of funds are involved is the time period that is going to determine the cut off. In case of liquid funds the time is 2 pm so this needs special attention as it is different from what is seen in case of other funds. This is earlier than the 3 pm that is present for the other funds including equity funds. This is important because the investor has to decide on when they want to buy or sell units and in some cases like equity there can be a difference in terms of what their cost is. There are days when the equity markets fluctuate quite a bit and investors can gain from this situation. The 3 pm time is earlier than the close of the equity markets which is half an hour later than this so the investor needs to be earlier than what they would act on in the equity market.

Specific day value

Investors have the ability to get the net asset value of several days which includes the previous days the current day and even the next day. So for example if the investor has put in their application before 2 pm in a liquid fund and the money has been transferred to the mutual fund by this time then the net asset value of the previous day would be applicable. On the other hand if the investor puts in the money in equity or debt fund before 3 pm then the value of the current day would be applicable to their investment. If the 3 pm deadline is missed then the next day’s net asset value would come into play. This shows that there is a wide variety of values that can be used and hence one has to be vigilant about the exact time and the conditions related to the investment so that the applicable value can be known.
First Published on Dec 13, 2016 12:26 pm
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