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What is the right time to exit from mutual funds?


Exiting at the right time is equally important as investing. However, exiting at the right time is equally tough as entering at the right time. when exiting a fund scheme, risks faced for reentry and transaction changes should be noted.

Can we sell units as markets have reached all time highs?

Most investors feel to book profits in mutual funds when the market is at all time highs and tend to exit during fall to minimize losses. But, it is impossible for any investor to estimate the progress of market and financial planners say that market may react opposite to their estimate. Investors should remember that your fund managers already do profit booking and exiting at their ends who sell nonperforming stocks and buy stocks that they believe will yield good. So, there is no need to take a decision about selling or buying based on market trends.

My fund is not performing well, should I exit?

You should understand that you need to review your investment if your fund is not performing well for sometime. If you feel the fund is not doing per your goals, consult a financial adviser and exit.

I need urgent money, can I redeem mutual fund units?

Open-ended mutual funds have high liquidity. If there is an unplanned need, it is common to look at liquid or contingency fund for solution. However, don’t meddle with funds set for fixed goal, these may attract taxes and exit load may be charged as well.

My goal has just 1 year left, can I redeem mutual fund units now?

Many invest in equity mutual funds through SIP for needs like children education, marriage, car, foreign tour, etc. They tend to get excited when the goal period is 1 year away. At this time, you should transfer debt fund, liquid fund to systematic transfer plan or move all the fund to debt fund. This gives immunity to fluctuations in market.

Due to rising markets, my asset allocation got changed. Can I sell some equity mutual funds?

Financial planners advise to follow asset allocation rules and review your portfolio yearly to confirm that your investment is on the path of your goal and are performing per your risk profile. If your asset allocation changes 5% during ups and downs in the market, there is no need to change. But for example, your fund has 60% allocation in equity and rose to 70% during market rise, then you need to rebalance your portfolio. For this, you need to sell some equity units and put it in debt funds.