Sell Your Mutual Fund Scheme

Your mutual fund scheme may have made good returns previously. However, there can be some symptoms of bad performance and you could need to get beyond such MF schemes. There are various reasons / scenarios the place you need to sell your mutual fund schemes.

1) Under Performance when compared with benchmark: If your MF just isn’t providing good returns, there may be several reasons. However, in case your mutual money is under performing in comparison with benchmark, then you definately should look into the scheme details then sell such mutual funds. E.g. if your large cap mutual fund “X” scheme has given 10% annualized returns in last 5 years in comparison with SENSEX, containing given 13% annualized return, then a X scheme is under-performing. You should look into the reasons before exiting.

2) Change in Fund Manager: Fund manager would be the backbone in the MF scheme performance. In case there may be any alteration of existing funds manager who’s got been managing funds well, you should look at the past history with the new fund manager. In case fund manager has inadequate experience, it is best to review your mutual fund and exit appropriately.

3) RBI Repo Rate impacts Debt MFs: When RBI lessens in repo rates, bond yields will drop and prices would rise and this would improve returns struggling with debt funds. When you see that rates are going in a upward direction, your credit balances fund returns fall. Hence, under this, you need to take a call and get from debt funds. However, you must review the RBI direction towards repo rate and not merely one instance.

4) Redeem depending on your goals: Though your MFs are performing well, dependant on your financial goals, you may should switch between equity to debt. E.g. During retirement that you need to decrease your exposure to equity funds mainly because it carries risk. Another example is all about meeting an organized financial goal 2-3 years early in advance. In such case you can not invest in equity funds till last minute on the goal. You may sell equity MF then invest struggling with debt funds or debt related instruments.

5) Does not meet your ultimate goal: When you have got a new MF which will not meet your goals or objective, it is best to exit immediately as opposed to regretting it and keeping it as a is. E.g. mid-cap funds could be brought only by dangerous investors. In case you are low to moderate risk investor, and purchased mid-cap funds, you need to exit immediately.

Concluding remarks: When you put money into Mutual Funds, it is best to keep these reasons at heart so that you can exit from mutual funds appropriately and put money into better funds. This way you can generate good returns inside your entire mutual fund portfolio.

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