Jan 01, 1970 3 min read

When Should You Exit Your Mutual Fund?

Here are the circumstances which need to be known by everyone who is thinking of exiting their mutual fund investment.
Investing and redeeming both are the important actions, and one has to be sure while taking any of them. Many a time investors try to time the market and buy funds when the market falls and sell them when the market goes up. For trading in stocks, it is fine, but is it worthy in the case of mutual funds? Not all the time! The reason being is that mutual fund investments are diversified in various sectors and companies, and there is a low probability that all the sectors get affected by the market moves at the same time.

Thus, timing the market for buying a fund is fine, but if you are thinking of redeeming or selling your funds, then you must do it in the following cases.

1. When the Fund is Underperforming Consistently

Underperformance of the fund can be better ascertained by the past three- or five-year returns which actually showcase different trends in the market values as per the market scenario. If your fund is consistent, i.e., stably performing with negative or falling values, then you must think of exiting your mutual fund. The reason being is that the consistency in the underperformance of the fund may cause a negative impact on the fund’s performance even in the long run.

2. When the Key Macro Factors Fluctuate Impacting Values

The macro economic factors are just not in your control, and you have to be aware of their impacts on your fund. There is a possibility that your fund manager’s decision contradicts with the changes made by RBI or government about the interest rate changes or so. This eventually causes great influence on the market performance of your mutual fund, and you tend to lose the worth of your investment values.

3. When It is the Time to Rebalance Your Portfolio

Rebalancing portfolio is an efficient technique to earn desired returns on the investments. As per the market scenario there comes a time when the need is felt to change the fund’s allocation and portfolio’s designing. Suppose your risk-bearing capacity has been reduced due to any of the reasons, then you need to reduce the risk exposure to your portfolio. And for that, rebalancing is required. So if it is the case in your investment, then you must make an exit from your fund.

Also Read- How To Rebalance Your Mutual Fund Investment Portfolio 

4. Your Fund is Getting Negative Media Attention

The media coverage is not always objective as there can be no smoke without fire. So, whenever you find any negative media coverage regarding the fund you have an investment in, you must take it with a pinch of salt. And in case the negativity continues for long, then you must switch to some other plan and exit the fund on an immediate basis.

5. When Your Investment Goal is Accomplished, or the Fund is Not Meeting Expectations

You must have invested your money with the motive of achieving a pre-defined goal. Once your objective is attained, there is no sense of continuing in the same fund. The reason being is that the fund might have proved beneficial for one of your goals but may not be able to fulfil further requirements. Moreover, in the case you find the fund’s performance inadequate in terms of fulfilling your expectations, then you must opt for exiting the fund right away.

6. When You are in Doubt with Fund Manager’s Decision

The fund manager plays a pivotal role in mutual funds online investment as he/she is solely responsible for taking care of the funds and allocate them in different avenues to gain returns. If at any point in time, you find that the fund manager has taken an unsuitable decision say changing the fund’s category or its objectives, which may affect your investment values or may not suit your needs, then you must leave the scheme immediately.

Exiting a fund is as important as investing in a fund, and a wrong decision may affect your financial health to a great extent. Thus, you must take better advice for making a right move. MySIPonline has the best financial advisors to help you in choosing the best investment for your portfolio in order to achieve your financial goals.

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