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Best Reasons to Sell your Mutual Fund Investments

We all are looking for the best mutual funds to invest in, to get maximum returns. But, as we do so, we should also keep an eye on the performance of the funds we are currently invested in and move out of them if we sense something fishy.

Let’s look at the various possible reasons which will make you think about selling your mutual fund units in this post.

  • Goal Achieved

The first thing we do when we start investing in a mutual fund, is, assign a goal to it. So, it completely makes sense to sell your mutual fund units to accomplish that goal assigned to it.

Also, let’s say that the goal was your child’s education, so don’t sell the units at just the exact time when you need the money for the education.

Instead, sell your investments 1 or 2 years before the goal and move the money into some fixed income instrument, so you don’t have to worry about sudden volatility in the market when your goal is near depreciating your final amount and you’ll have all the money you need to achieve it.

  • Scheme Underperforming

Another very important reason to consider selling your mutual fund units is when you see your invested scheme underperforming.

You should always do a periodic review of your invested funds every 6 months and compare your scheme’s performance with its peers, benchmark, and category.

If you see that the scheme has been underperforming for more than a year, then start your research and try to find out the possible causes of this underperformance. If you get satisfied with the possible reasons for underperformance and you think that there is a scope of a turnaround, then stick with the fund otherwise it’s time to say Good-Bye.

Also Read: What are Equity Savings Funds?

  • Investment Style Change

When we do our research and finally decide on a particular scheme to invest in, we do that after seeing a lot of parameters like the objectives of the scheme, the investment pattern, the fund manager, etc.

So, if midway, you see that the fund manager has decided to change the style and follow a different investment strategy, so make sure that these changes are still in line with your risk profile based on which you decided to invest in it in the first place. If they aren’t, you may have to sell your investments and look for other options.

  • Asset Rebalancing

Asset allocation is one of the main components of everyone’s financial plan. It’s how you decide to diversify your investments across equity, debt, gold and other investment options based on one’s risk appetite.

So, if you have an asset allocation plan, you have to periodically rebalance your portfolio to maintain the composition of your investments as you deem fit.

So, at any point, you see that your portfolio is getting heavily reliant on equity, you may have to sell your units and move the money to other asset classes to regain your original composition of the asset plan.

  • Fund Manager Change

Another important reason, nowadays, to consider selling your mutual fund is when the manager of the fund leaves.

Many people invest in a mutual fund seeing the track record, the performance and the investing style of the fund manager.

So, when a fund manager leaves and a new manager comes in, the new manager may bring in a different philosophy or a different strategy of his own which can lead to changes in the portfolio and can signal a red alert to consider selling your mutual fund units.

Also Read: Latest Fixed Deposit Rates 

  • Financial Emergency

This is another reason which is not in your hands at all and you may be forced to sell your investments in mutual funds.

However, if this situation arises and you decide on selling your units, just think about other alternatives before you do so.

  • Better Alternative

You may have started your mutual fund investment journey with a large-cap fund or a balanced fund, but after some time you may realize that there are better alternatives out there which are performing much better.

So, if you are willing to take the additional risk, you may want to sell your investments and reinvest into a mid-cap or a diversified fund to generate higher returns.

  • Investor Growth

People who are starting to invest or are rather newbies and don’t have much time and experience; choose mutual funds over investing in stocks directly.

But, as you grow and gain experience and more wealth over the years, it may be possible that now you are more confident and in a better position to directly buy stocks and diversify your investments.

  • Wrong Scheme Purchase

People make mistakes while selecting a fund because of incomplete research or many other reasons are possible for this and end up in wrong schemes which they wouldn’t have selected in the first place.

Or, many people buy too many funds to realize their goals leading to over-diversification of their portfolios and difficult to keep track of and eventually lower returns.

Eventually, this will lead them to sell or reduce their schemes and move on to better ones.

So, friends, these are some of the reasons which should make you think about selling your mutual fund investments.

What do you think?? Share your thoughts with us in the comments below…

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