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When to sell your mutual fund scheme?

Your mutual fund plan may have performed well in the past. However, there could be some signs of poor performance and you may need to exit such MF schemes. There are various reasons/scenarios where you need to sell your mutual fund schemes.

1) Poor performance compared to benchmark: If your MF is not providing good performance, there could be a number of reasons. However, if your mutual funds are underperforming compared to the benchmark, then you should check the details of the scheme and sell said mutual funds. For example, if a large cap mutual fund scheme “X” has delivered a 10% annualized return over the past 5 years compared to SENSEX which has delivered a 13% annualized return, then your X scheme is outperforming. deficient. You must check the grounds before leaving.

2) Change in fund manager: The fund manager is the backbone of the performance of the MF scheme. In case there is any change in the existing fund manager who has been managing the funds well, you should check the past history of the new fund manager. In case the fund manager does not have the proper experience, you should review your mutual fund and exit appropriately.

3) RBI Repo Rate Affects Debt Funds – When RBI lowers repo rates, bond yields will fall and prices will rise and this will improve yields on debt funds. When you see interest rates going up, the yields on your debt fund fall. Therefore, in this situation, you need to take a call and get out of debt funds. However, you should review the direction of RBI towards the repo rate and not just one instance.

4) Redeem based on your goals – Although your MFs are doing well, depending on your financial goals, you may need to switch from equity to debt. For example, during retirement, when you need to reduce your exposure to equity funds, as they carry risk. Another example is about meeting a planned financial goal 2 or 3 years in advance. In such a case, you cannot invest in stock funds until the last minute of the goal. You can sell MF shares and then invest in debt funds or debt-related instruments.

5) It does not meet its purpose: When you have bought an MF that does not meet its purpose or objective, you should leave immediately instead of regretting it and keep it as it is. For example, mid-cap funds can only be contributed by high-risk investors. If you are a low to moderate risk investor and have bought mid-cap funds, you should get out immediately.

Final remarks: When you invest in mutual funds, you should keep these reasons in mind so that you can properly exit mutual funds and invest in better funds. In this way, you can earn good returns on your entire mutual fund portfolio.

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