Depending on what time you submit your application and money with Mutual Fund Company, you will be allotted the suitable day’s NAV. Cut –off time in mutual fund scheme determines what Net Asset Value (NAV) you get to buy or sell units of your mutual fund schemes.
There are different cut-off timings for liquid, equity and debt funds. Cut off time plays an important role in determination of the day you allotted the Net Asset Value (NAV). Investor can be allotted the NAV of the same day, the previous day or next day according to the submission time of their application and funds.
The cut-off time of liquid fund is 2 pm whereas cut-off time of equity and other debt fund is 3 pm.
In the Case of Liquid Funds
If investor invests (submits both application and fund) in a liquid fund before 2 pm on a working day, he will be allotted units of the scheme at the NAV of the previous day. And if he/she submits application form and transfer the funds after 2pm, he/she will get the units at the NAV of the same day.
In the Case of Equity and Debt Funds
For equity and debt funds the cut-off time for an application to reach the office for acceptance is 3 PM. If anyone submits his/her application form before 3pm, he/she gets the NAV of same day. If he/she submits later than this time, then will get the NAV of the next day. These rules apply for applications which are below 2 lakh.
Cut-off time does not matter for individual with long time frame because a day’s movement won’t make much difference in the long run, but it matters a lot in the case of liquid fund, or if it’s a large amount of money.