Skip to main content

When to Sell a Mutual Fund?

Compared to buying a mutual fund, investors often make worst decisions when it comes to selling them



The fact that there are so many mutual funds in India and choosing a suitable one is difficult is now understood by every saver. Everyone has a way around it, whether it's advisors or websites or just asking around. However, there's actually an even more difficult choice that investors face--which funds to sell off and when. Curiously, more knowledgeable and more involved investors face this problem a lot more than others. The reason is those of us who are active and involved investors always have an urge to do something. Such investors generally do well because because they learn, analyse and act more than others. Therefore, they start equating being good investors with doing something, often anything. Unfortunately, along with everything else, in practice, this also translates into being all too ready to sell off their investments.


There are many reasons for selling funds but not all of them are good ones. There can be exceptions but the good reasons tend to be about the investor's own finances and the wrong reasons tend to be about the fund. Let me explain.


Overactive investors give three reasons for wanting to sell off a fund investment. One, they've made profits; two, they've made losses and three, they've made neither profits nor losses. That sounds like a joke but isn't. Someone will say, 'Now that my investments have gone up, shouldn't I book profits?' Alternatively, 'This fund has lost a bit of money recently, shouldn't I get out of it?' And finally, 'The fund has neither gained nor lost, shouldn't I sell it.' Basically, what I'm saying is that investors who have a bias for continuous action can create a logic for taking action out of any kind of situation.


And which is the right reason for selling a fund? Obviously, none of the ones above. By themselves, they are not legitimate reasons for selling a fund. The first comes from the spurious 'booking profits' concept that advisors have promoted. Booking profits doesn't make sense for stocks, and it makes even less sense for mutual funds. In both, this attitude makes investors sell their winners and hang on to their losers. In mutual funds, the whole point is that there is a fund manager who is deciding for you which stocks to sell and which to buy. If the fund manager is doing this job well, then the fund is making good returns. Therefore, selling a fund that has made good returns is the exact reverse of what investors should be doing.


Let's come to the second reason now. While selling underperformers is a legitimate idea, you need to evaluate the timeframe and the degree of underperformance. Investors try to sell funds that have generally excellent performance but may have underperformed other funds by small margins. Someone will say that over the last year, my fund has generated 25% but five other funds have generated 30% so I will switch to those. This switching based on short-term past performance is counterproductive and does nothing to improve your future returns. Only if a fund underperforms consistently for two or more years.


So when should investors actually sell their funds? The right answer is that they should be guided by their own financial goals. You should sell a fund and get your money out when you need it. Let's say you have invested for five or ten or fifteen years, continued your SIPs, and now the money has grown to what you need. You may need to make a down payment for a house, or pay for your child's education, or whatever else. If you're getting close to that time, you should sell and redeem, irrespective of the state of the market. In fact, unless it's an expense that can be postponed, you should start acting one or two years before time. Withdraw the money from the equity fund and start parking it in a liquid fund. You can use an automated STP (Systematic Transfer Plan) for this which will be convenient.


In a manner of speaking, the primary goal of investing is not to invest but to sell because that's when you achieve your goal. Be guided by that.



SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...

ICICI Prudential Value Fund Series I

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   Performance of the scheme will be benchmarked to the S&P BSE 500 index ICICI Prudential Value Fund is a closeended equity scheme. The scheme will have tenure of three years (1095 days) from the date of allotment of units. Units of the scheme will be fully redeemed at the end of the maturity period, unless rolled over. NFO PERIOD:   The NFO is open from October 18 to 28. The minimum subscription during the NFO period is Rs 5,000. SCHEME OBJECTIVE:   The scheme aims to provide long-term capital growth by investing in a well-diversified portfolio of equity and equity-related securities. INVESTMENT STRATEGY:     The fund proposes to invest in stocks that are trading at a huge discount in the BSE 500 index and plans to book profit and distribute dividen...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now