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When To Sell Mutual Funds?

IndianMoney.com Research Team | Updated On Tuesday, July 03,2018, 06:24 PM
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When To Sell Mutual Funds?

 

Your mutual fund scheme has been slipping up for the past few months. You are worried. Thoughts of exiting this mutual fund scheme are running through your mind. Should you exit….Should you not exit…You are not sure.

Your mutual fund scheme has given very good returns in the past. You just don’t feel like selling it. This is where you must remember….Past returns of a mutual fund scheme, is no guarantee of future performance. Always keep emotions in control while investing your hard earned money.

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Check the performance of the mutual fund

If you have invested in an equity mutual fund, check the performance of your mutual fund scheme, compared to a benchmark such as SENSEX or the NIFTY. If your mutual fund scheme has been giving 9% annualized returns in the past 4 years compared to the SENSEX, which has given 12% annualized returns in the same period, then your mutual fund scheme has underperformed the SENSEX.

You must now check if only your mutual fund scheme has been underperforming, or if the entire sector (other mutual funds also) have been underperforming. Check and see if the mutual fund scheme has been underperforming its peers (fellow mutual fund schemes of the same type), for the last 1 to 2 years. If results are not satisfactory, it’s time to consult your financial advisor. He could find reasons for this underperformance and then ask you to exit the scheme.

See Also: Mutual Fund For Beginners

Is there a change in fund management?

The fund manager is the backbone of a mutual fund. The fund manager is responsible for the management and performance of the mutual fund. If your mutual fund has been performing well in the past, credit must go to your fund manager.

Now to the big question. Do you know your fund manager’s name? You could always check the news of your fund manager in the newspapers, or take the help of your financial advisor.

Let’s say this fund manager quits and the fund house has appointed a new fund manager. If the new fund manager is not as experienced as the previous one, you should keep checking the performance of your mutual fund scheme. If you are not confident and happy with the performance of the mutual fund scheme or detect a dip in performance, consult your financial advisor on exiting the mutual fund scheme.

See Also: How to choose your mutual fund portfolio

Mutual fund does not match financial goals

When you have invested in a mutual fund which does not match your financial goals, consider exiting this mutual fund. This is a smart move; otherwise you would have lots to regret.

You are a conservative investor who does not like to take risk in investments. You have invested in an equity diversified mutual fund scheme. This is a scheme which gives high returns but at high risk.

This mutual fund does not match your financial goals and investment style. You are a conservative investor who does not like risk in investments, but you have invested in a mutual fund scheme, suitable for an aggressive investor. A debt fund scheme would have been a suitable investment.

Investing is all about good returns. Yes, Return on Investment. If you are stuck with mutual fund schemes which are not giving good returns, you better exit them. There is no point wasting your hard earned money. Invest your money in better mutual fund schemes, which match your financial goals and earn good returns on your mutual fund portfolio. Be Wise, Get Rich.

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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