When is the right time to sell your holding in mutual funds?
'Disclaimer: This story is for informational purposes only and should not be taken as investment advice.'
Investors are often confused as when it is the right time to exit a mutual fund scheme because exiting a scheme in haste can result in reinvestment risks and transaction charges.
Let's have a look at some of the common queries asked by investors
Should I redeem because the markets have touched new highs or valuations are expensive?
Many investors believe that they should book profits in mutual fund schemes when the markets are rising or near top. On the other hand, when the markets are falling, investors are of idea that they can cut on their losses by exiting the same at earliest.
But according to financial planners, investors should be aware that the fund manager is booking profits and cutting losses for you. He is continuously selling stocks, whose performance deteriorates or whose outlook is not favourable, and buying stocks whose performance is improving. Hence, there is no point in redeeming units because the markets are at a new high or on a downward trend, as reported by ET.
The scheme that I have invested in is not doing well. Should I exit the same?
Review the investment if your scheme is not performing well.
Should I redeem my mutual fund units, if I need money urgently?
According to ET, when you need money for an unplanned or unforeseen event you should ideally dip into your liquid or contingency fund. Avoid redeeming funds that are built to meet a particular goal. Also, keep in mind the tax implications and exit loads applicable.