De-jargoned: trigger1 min read . Updated: 07 Dec 2009, 10:08 PM IST
What is it?
Suppose you invest in a mutual fund (MF) scheme at a net asset value (NAV) of Rs10. Your target is Rs15. Time goes by and you soon forget about it. Before you realize you have already reached your target, markets turn volatile, your NAV falls to Rs11 and you have missed your chance. Is there anything you could have done to avert this? Enter Trigger.
What does it do?
Through this facility, you can pre-set a target and opt for an automatic redemption or at least get a reminder once you reach the target. You can set your target in your application form at the time of investment. Most MFs offer targets in terms of NAV or Sensex or Nifty levels or gains in the total corpus.
What to do with it?
You can either choose to get reminded once your trigger gets activated or you could tell your fund to automatically redeem your corpus. Further, instead of getting cash in your hands, you could opt for an automatic switch from, say, an equity fund to a liquid fund. This books profits and yet continues to earn liquid fund returns.
Who offers it?
Initially, a few MFs such as UTI and Principal used to offer it. Now many MFs such as Birla Sun Life, HDFC and Reliance offer it. This facility is not compulsory and it will depend on the customer whether he wants to opt for it. So if you choose a reminder trigger, you may still continue to stay invested. Nothing changes and life goes on.