When to Sell Your Mutual Fund Scheme?

Your common store plan may have made great returns before. Be that as it may, there could be a few indications of terrible presentation and you may need to escape such MF plans. There are different reasons/situations where you have to sell your shared store plans.

Under Performance compared to the benchmark

If your MF is not providing good returns, there could be several reasons. However, if your mutual funds are underperforming compared to the benchmark, then you should check the scheme details and sell such mutual funds. E.g. if a large cap mutual fund “X” scheme has given 10% annualized returns in last 5 years compared to SENSEX, which has given 13% annualized return, then your X scheme is under-performing. You should check the reasons before exiting.

Change in Fund Manager

 The fund manager is the backbone of the MF scheme performance. In case there is any change in the existing fund’s manager who has been managing funds well, you should check the past history of the new fund manager. In case the fund manager has an inadequate experience, you should review your mutual fund and exit appropriately.

RBI Repo Rate impacts Debt MFs

When RBI cuts down in repo rates, bond yields will drop and prices would go up and this would improve returns in debt funds. When you see that interest rates are going in an upward direction, your debt fund returns fall. Hence, under this situation, you should take a call and get out of debt funds. However, you should review the RBI direction towards repo rate and not just one instance.

Redeem based on your goals

Though your MFs are performing well, based on your financial goals, you may need to switch between equity to debt. E.g. During retirement where you need to reduce your exposure to equity funds as it carries risk. Another example is about meeting a planned financial goal 2-3 years ahead of time. In such a case, you cannot invest in equity funds until the last minute of the goal. You may sell equity MF and then invest in debt funds or debt related instruments.

Does not meet your goal

When you have purchased an MF which does not meet your goal or objective, you should exit immediately instead of regretting it and keeping it as is. E.g. mid-cap funds can be brought only by high-risk investors. In case you are low to moderate risk investor, and purchased mid-cap funds, you should exit immediately.

Concluding remarks: When you invest in Mutual Funds, you should keep these reasons in mind so that you can exit from mutual funds appropriately and invest in better funds. This way you can earn good returns in your entire mutual fund portfolio.

Expectation you discover the article useful…Thanks for sharing

Related posts