What is Trigger option in mutual funds?
Trigger option is a facility offered by mutual funds to investors to redeem or re-allocate investments by specifying certain limits.
The trigger may apply to the entire investment or a portion. Some funds allow investors to redeem or switch only a portion of appreciation.
This facility eliminates the need for the investor to take any action once the limits are specified. He can easily book profits and benefit from the appreciation.
When activated, a trigger results in a transaction. This will imply costs in terms of loads and taxes from gains.
A trigger may require to be reviewed to ensure that it is relevant to the given market situation. AMCs may specify the frequency with which it can be reset.
Investors receive an account statement by the fund to intimate them of the activation of the trigger and the resultant transaction.
Source: Economic Times
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