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Selling Your Mutual Fund Investments- Note These Important Points


Obviously the investment goal with which you have made your money parked in mutual fund kitty will push you to pull out the funds from these investments. Nonetheless you should note these important points before redeeming mutual fund units or following criteria should decided your exit decision:


Selling Your Mutual Fund Investments- Note These Important Points

1. Experts warn against redemption purely on profit or loss making: It is highly suggested to be in hold of your mutual fund units till a long duration until some unforeseen circumstance needs to be met with immediate financial liquidity from the asset class. This is because any kind of unjustified temptation on account of sudden gains or short term losses from the investment could result in heavy losses for you.

2. Structure, investment pattern are all lined up for changes: A recent SEBI clause that aims to serve its customer better has led to the categorization of mutual fund schemes and there is hence a more likely chance of schemes merging with other schemes.

So, in case there is change in a fund manager, mandate as like the erstwhile debt fund now begins investment in low-profile securities, it may be a good time to exit the investment and safeguard yourself against any future risks.

3. In case of equity mutual fund investment, better you switch to a safe debt fund category before the maturity to avoid any abrupt losses that may befall you in case the market is on a declining spree at a time when you are holding in mutual funds are to mature.

4. Performance of the scheme: For short term losses, you shouldn't take a sell call on mutual fund units. However in a case when the scheme has continuously underperformed for a year or two with no clear or satifactory reason and has also in a worst case underperformed against its benchmark index then you definitely need to exit the investment.


5. Over-diversification with too many mutual fund schemes: It is best adviced to keep a maximum of 4-5 mutual fund schemes as any number over this adds to complexity in terms of keeping track of the fund performance. So, if you due to any reason are in hold of several schemes then you can sell off the extra ones that you do not find suiting your overall portfolio.

How many mutual funds you should have in your portfolio?How many mutual funds you should have in your portfolio?

6. Portfolio re-balancing: When you after review your financial portfolio find to be skewed away from the decided on asset allocation plan, you may at this stage also decide on to sell your mutual fund holdings.

Story first published: Monday, January 8, 2018, 14:27 [IST]
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