Mutual funds have great importance in achieving different financial goals in life. But sometimes these mutual funds can force you to think about exiting the investment. However, experts say that the exit strategy from mutual funds should not be hasty, but should be a planned step to ensure this. There are certain circumstances when you should consider withdrawal or exit from a mutual fund. This will help you avoid stagnation in returns.
If the goal is achieved then you can go out
Whenever investment is made in mutual funds, it should have a goal. If the fund achieves your target then you can consider exiting the fund. Whether you are building an emergency fund, saving for your child’s higher education or investing for your retirement, if you have achieved your desired goal or are close to achieving it, you may want to consider withdrawal from mutual funds. Can.
prolonged poor performance
According to Kotak Securities, if your fund is performing poorly continuously for a long time then there is a need to exit it. If your fund has been performing poorly for a long time, you may consider cashing it out and investing in a better performing fund. A fund may perform poorly for many reasons. This could be due to the current economic environment, government policies or decisions taken by the fund manager.
Changes in fund objectives and risks
If the core objective of a fund changes over time and the risks associated with it also change, you may have an exit option. When SEBI reshuffled mutual funds in 2018, several funds were merged as per the regulator’s instructions. If you feel that your fund’s objectives and risks no longer match your goals, you can redeem your investment.
There is a need to rebalance the portfolio
You may need to rebalance your portfolio amid current market fluctuations. To get back to the original asset mix, you may have to sell part of your equity funds and invest the proceeds in debt funds. To do this, you can consider withdrawing into equity funds and investing the proceeds in debt funds.
Change in fund manager
The performance of a mutual fund largely depends on the decisions taken by the fund manager. When a fund manager manages a fund for a long time, he is well aware of the investment style of the fund house. However, when a new manager is at the top, it may take some time for him to become familiar with the investment style of the AMC. Also, a new manager often brings his own ideas that may or may not fit with the fund’s objectives. If you feel that the decisions of the new manager are not in line with the objective of the fund, you can opt for an exit.
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