When You Need to exit a mutual fund strategy

New Delhi: Mutual fund investment was preferred by a massive part of middle-income earners, salaried taxpayers, risk-averse, in addition to many big-ticket investors. The taste for mutual funds is mostly due to skilled management of cash, incorporation of calculative tools, the pre-determination of risk and yield, low risks as comparatively compared to direct equity investment and also simple entry-exit choices.

Together with the presence of different objectives, risk-taking capacities, and preference for the underlying assets, the mutual fund business has framed numerous schemes such as equity funds, debt funding, hybrid/balanced funds, index funds, fund of funds, etc..

People investing in mutual fund strategies remain biased over the right exit time from a mutual fund scheme and the quantum that needs to be sold off. Exiting a mutual fund scheme is a very thoughtful choice, thus, the conclusive action ought to be taken after considering several factors. Inferentially, the decision to depart the mutual fund scheme shouldn’t hamper your returns in a large way.

One ought to factor in a selection of nodes before taking the final decision to exit a mutual fund.

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There are numerous powerful reasons that prompt an investor to exit a mutual fund scheme which contains a change in finance management team/fund managers or frequent changes in the chief fund manager, prolonged underperformance of mutual fund and shift from mutual fund’s objective. Other problems that institute an exit decision will be the realisation of investment goal or when an investor is ready to change to a different asset class.

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According to CRISIL, it’s imperative that investors follow a well-thought-out process for exiting their mutual fund trades. The investor shouldn’t move out of a fund just because it has underperformed in a few quarters or only because there’s a change in the finance manager, the credit rating agency included.

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