Mutual Funds: 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.
Mutual Funds: Mutual funds are of great importance in fulfilling different financial goals in life. But sometimes these mutual funds can also force you to think about exiting the investment. However, experts say that the exit strategy from a mutual fund should not be done in a hurry, but it should be a planned step to ensure it. There are some situations when you should consider withdrawal or exit from a mutual fund. This will help you avoid stagnation of returns.
You can exit if the target is achieved
Whenever investing in a mutual fund, it should have a target. If that fund achieves your target, then you can consider exiting the fund. Whether you have invested to build an emergency fund, save for your child’s higher education or for your retirement, if you have achieved your desired goal or are close to achieving it, you can consider exiting a mutual fund.
Long-term underperformance
According to Kotak Securities, if your fund is consistently underperforming for a long time, then there is a need to exit it. If your fund has been underperforming for a long time, you can consider redeeming it and investing in a better-performing fund. A fund can underperform due to many reasons. This could be due to the current economic environment, government policies or decisions taken by the fund manager.
Change in fund objectives and risk
If the main objective of a fund changes over time and the risk associated with it also changes, then you can exit it. When SEBI restructured mutual funds in 2018, many funds were merged as per the regulator’s instructions. If you feel that the objectives and risks of your fund no longer match your goals, you can redeem your investment.
Need to rebalance the portfolio
Amid the current market volatility, you may need to rebalance your portfolio. To get back to the original asset mix, you may have to sell part of your equity fund and invest the proceeds in debt funds. To do this, you can consider withdrawing from 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 get acquainted with the investment style of the AMC. Also, a new manager often comes up with his own ideas that may or may not fit the fund’s objective. If you feel that the decisions taken by the new manager are not in line with the fund’s objectives, you can opt for an exit.
