If or When to Sell Your Mutual Funds Scheme?

Can we categorise the right moment for selling our mutual funds? What if your mutual fund scheme has benefited you in the past, would you still like to sell it?

According to the expert’s decisions solely based on profit and loss might affect your finances or could backfire you in some cases. In order to know the right time to get out of MF schemes, there are certain steps one needs to take care of.

1. Firstly, If your mutual fund scheme is not providing you with good returns as compared to the benchmark set during the time of investment then check for details and sell those funds accordingly.

2. Immediate requirement occurs only when you desperately need liquidity or there is something extremely wrong with your MF.

3. The perfect time to sell your mutual funds is when you realise you’ve achieved your financial goals or have gained enough profits through the same.

4. In case you’ve invested in an equity fund, maturity is to shift your investments to a low debt fund before the eve of financial goals.

5. This shift will help you to ensure that a sudden change in the market will not affect your long-term financial goals.

6. To illustrate the same with an example, suppose one might have invested their money in an equity fund to take care of their parent’s health or children’s education and is waiting for the last moment to sell their investments to gain the desired profits, what if markets tumble down at the last minute? As a consequence, your investments might lose its worth or you might fail to achieve your desired goals. This waiting could prove to be dangerous.

7. In case your mutual funds are not performing as expected, then one should check the details of the scheme and should sell the mutual funds immediately. For E.G if a company X provides you a scheme “Y” which has given minimal of 10 percent returns annually in last 10 years in comparison to SENSEX, which has provided 15 percent of returns annually, then your scheme Y is not performing good enough. NOTE: One should only withdraw from mutual funds scheme if it’s not providing enough profits as expected or promised by the company.

8. Any change or alteration in Funds executive/Fund administrator can be the main reason for not so good returns on investments as Funds executives are treated as the backbone of the Mutual Funds plan.

9. In case if you find the new fund executive inefficient or inexperienced you should review your mutual fund’s scheme and step outwards.

10. Before exiting do check the background or history of the manager if he seems to be promising you should opt to stay back for good results.

11. Opting out shouldn’t be a haphazard decision. Better would be if you choose it from the banks using online banking then you can opt out even from the comfort of your home.

12. RBI plays an important role in this matter. When RBI reduces the repo rates, link yields will go down, as as a consequence price of the same would go high, this helps to improvise returns in debt funds. If you witness that interest rates are improving, your debt fund returns fall. Therefore to handle this situation you should take a call to move out of debt funds. However, as mentioned above, one should always re-evaluate the RBI’s track in the direction of the repo rate.

13. Even if your mutual Funds are performing as per your expectations, according to your monetary goals, you might require switching amid equity to debt. E.g. If your investment is matured before 2-3 years of your retirement you cannot plan to invest the same amount in another scheme first, you should sell your equity MF then try investing it in debt funds or debt instruments.

14. It is strictly recommended that if your MF is not benefitting you or is unable to fulfill your objectives you should exit immediately afterward the realization, better to save your money initially then regretting later on.

NOTE: One should keep a check on the risk factor always, For example, Mid-cap funds are only for high risk investors. Words to remember: One should keep all these factors in mind so that you can easily move out of mutual funds scheme and be in a situation of win where you can even invest in better funds later on without any losses.

 

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