Mutual funds are an ideal market-linked investment vehicle that can help you create wealth in the long term. In recent years, many investors began investing in mutual funds to enjoy its benefits such as diversification, higher returns and tax savings. However, a mutual fund investment portfolio requires monitoring at regular intervals to its performance and decide whether to stay invested.
This article lists down some situations when you can consider selling your mutual fund investments.
- Fund performance
The performance of a mutual fund scheme is the first indicator that can help you decide if it is the right time to sell your investments. For example, if the fund has been underperforming consistently compared to its peers in the group, it could be a trigger point. However, it is not advisable to exit a fund based solely on the underperformance over a short period. You could wait for a recovery, failing which,you can exit.
- New fund manager
A fund manager plays anessential role in managing your portfolio and deciding where to invest and what to skip. In other words, they play a decisive role ina fund’s performance. A fund manager’s replacement can impact your portfolio as well. Keep a close watch on the new fund manager’s decisions to know how to act on your portfolio.
- Change in ownership
Experts recommend investing in a mutual fund house whose investment philosophy matches with yours to reap maximum mutual fund benefits. If another fund house acquires the mutual fund house you have invested in, the investment philosophy could change. In that case, it is wise to monitor the fund’s decisions. If they appear to have had unfavourable results on your portfolio, you may want to sell your holdings or move to another fund house.
- Common holdings
If you find significant overlap in stock holdings of two different mutual fund schemes you are invested in, you may want to sell one of them. This is because an overlap in holdings can come in the way of achieving diversification and increase your portfolio’s complexity.
- Liquidity needs
If you are close to achieving your financial goals, you could move to liquid funds via a Systematic Transfer Plan or Systematic Withdrawal Plan to protect your funds against a market downturn. The key is to not sell investments simply because of immediate higher returns.
To summarise, selling your mutual fund investments should be a well-thought decision. Remember, when you invest in mutual funds online, you have a financial goal to achieve. So, before you let go, carefully consider the benefits of mutual funds and its cons of selling them at an early stage.
As a new investor, begin your mutual fund journey by reading about SIP or SIP investments.