Post demonetization, a lot of citizens are investing heavily in mutual funds. Mutual funds especially equity mutual funds, have outperformed FDs and other investments in the past year. Citizens prefer investing in equity through mutual funds, rather than investing directly in the stock market. This is considered less risky and there’s a fund manager to manage the money.
But, what if your mutual fund investments are not reaping the required investment? Simply speaking…What if the mutual fund investments are not giving the returns you want….
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First find out why the mutual fund has underperformed. One of the main reasons could be:
Change in the fund manager: Each fund manager has a unique style of selecting stocks for the mutual fund portfolio and managing it. You depend heavily on the fund manager’s skill and expertise to manage your money. A change in the fund manager may create doubts in your mind, as you are not familiar with the new manager’s style and restructuring of the portfolio takes time. Be patient and give the new manager some time, especially if the mutual fund goals have not changed. Keep an eye on his performance for the next few quarters.
There’s a change in the fund strategy: You have invested in the mutual fund in line with your financial goals. If you find that the fund manager is not sticking to securities you are comfortable with, it’s time to make an exit. This is also true if the fund manager starts investing in securities, which are not in-line with the mutual funds original goals.
2. Dump the underperforming mutual funds
Investing in mutual funds and holding it for the long term, doesn’t always work. Sometimes, you may have to sell the mutual funds, if they have been underperformers for a long time. But, do check if this is a temporary bad phase. Dump the mutual fund if it has been a bad performer for 3 or more years.
SEE ALSO: Mutual Funds Sahi Hai?
If your mutual fund has been acquired or merged, there are chances this would affect the performance of the fund. If your mutual fund has been acquired, there would be a change in the fund management team. A merger would mean not only a change in the fund management team, there could also be a change in the investment objective of the mutual fund scheme.
Many existing investors would exit the mutual fund or stop investing further, which means an underperforming mutual fund. If you feel the mutual fund (after acquisition/merger) is not in line with financial goals, exit the investment. Be Wise, Get Rich.
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