What does switch mean?

What does switch mean?

In mutual funds, a switch refers to the action of transferring an investment from one scheme to another within the same mutual fund house (AMC). This facility allows investors to move money between schemes—such as from a debt fund to an equity fund—without having to redeem and re-invest the funds manually.

Switching is a convenient way to realign your portfolio as per changing goals, market outlook, or risk preferences. The transaction happens internally within the AMC, and new units are allotted in the target scheme based on the applicable NAV.

Key points about switching in mutual funds

  • Available only within schemes of the same fund house
  • Treated as a redemption and new investment for tax purposes
  • May involve a switching fee, if applicable
  • Subject to exit load and entry conditions of the respective schemes

What if...

ScenarioExplanation
You want to rebalance your portfolioSwitch helps move funds across asset classes without exiting the fund house.
You’re unsure about tax impactSwitches are taxable—capital gains rules apply on redeemed scheme.
You initiate a switch close to cut-offNAV of redemption scheme and target scheme may differ based on timing.
You want to switch between fund housesNot possible—you’ll need to redeem and invest in the new AMC separately.
Always evaluate exit load, taxation, and minimum investment requirements before initiating a switch to avoid unexpected deductions or rejections.

Last updated: 16 Jun 2025