Investing in mutual funds is quite interesting and beneficial. It’s one of the best ways in which to appreciate capital at a quantum of risk. However, no one talks about the murky side of mutual funds, which is when there is a loss in mutual fund investment.
Typically, around 43% of retail investors sell off their holdings in equity mutual funds within a period of 2 years. They don’t stick around for the minimum 5-year expected period when the decision ought to be taken!
One of the toughest decisions you will make about mutual funds is knowing when to sell them. They may be great for wealth creation, but not when things go south! So, in this blog learn about when to say goodbye to your mutual fund investment.
If you are consistently witnessing a poor performance of the mutual fund, you should consider selling. Watch out for a period of 3-4 quarters, however. If the performance is poor, then may be it is time to say goodbye.
When you have achieved your personal financial goals, and investment is always done with a goal in mind, then the time has come to sell your mutual fund. If you have achieved your personal goal of raising Rs. X amount then it could be the time to sell.
If you are looking to rebalance your portfolio, then you can choose to sell off some funds from your portfolio and invest in new ones. Rebalancing your portfolio is an activity that you need to undertake from time to time.
If there is a change in the fund manager and you are discontented with the fund manager, then you can sell off the units you hold in that fund and invest in one that you like.
When interest rates are changed then debt mutual funds are impacted. Debt mutual funds are intrinsically linked with interest rates. They are also inversely linked with interest rates, meaning higher the interest rate lower the yield of the debt mutual fund.
Don’t like the direction in which the scheme is headed? Opt out of it. If you have one investment objective, but the scheme has another one, you are justified in selling your units in the scheme.
If the asset allocation of the fund changes and you are uncomfortable with the change, you can choose to sell off your units.
Investing in mutual funds is an ongoing process. It requires you to be on your toes all the time. You need to study your mutual fund investments carefully so that you can manage the portfolio well. Knowing when to sell is something you should have no regrets about either.
Selling off loss-making mutual funds is something that you ought to do on a frequent basis. Also, be careful of market corrections. When markets dip it does not always mean there is going to be a dip forever. Markets improve. Life goes on. Greed is always there in man and in the market.