When Can You Think Of Selling Your Mutual Funds?

When Can You Think Of Selling Your Mutual Funds

Generally, people get driven into investing in mutual funds, bond, debts, and other monetary securities by heeding the reference of some friend or advertisements.

Before putting their hard- earned money into any instrument, investors are on all- alert mode ensuring the security of their money along with a hope of earning benefits.

However, market conditions are sometimes more volatile which boggles them, and they end up deciding to book their profits from mutual funds.

These reasons taken in a moment of panic and fear often are imprudent and prove to be futile.

Typical reasons why people sell mutual funds:

Market at its peak

When the market trends become favourable and are all-time high, and has performed immensely well, in such situations, investors usually feel enticed to sell the mutual funds.

Market at its lows

When the market goes down and the fund has delivered negative or poorly low returns, people are compelled to exit such mutual funds in anticipation of avoiding further losses.

Underperforming Mutual Fund

A person might also depart if the fund in which an individual has invested accomplishes returns below or lower than the peer funds for a long time.

The financial advisors say that investments should be goal oriented and preferably long term.

Thus, withdrawing from mutual fund or other securities should not be done unless a person faces any of the following conditions: improper investments, need liquidity, and have no other options available.

However, as the investments are done with full concern likewise, a person must manifest an equitable shrewdness in selling their mutual funds.

Also Read: Role of a Fund Manager in Mutual Funds

Here are 5 reasons why a person should sell mutual funds:

1.Investment objective is achieved

Investments are generally goal oriented and are done to acquire some overwhelming target such as education, wedding, retirement, car, etc. in a limited income.

If a person has completely or nearly reached his respective goal of the investment, he may proceed to exit the mutual fund.

However, the transition of corpus from equities to debt funds should be done gradually in a period of 15- 18 months.

This act protects the investment of a person from facing the bare hits of risky market activities.

2.Constantly underperforming funds

Often an investor might get a bitter impression if performance of the mutual fund trails down continually, and this can be a reasonable cause to depart.

Nonetheless, finance experts believe that if a mutual fund has been giving good gains for a long time and recently staggered in its performance then a person should avoid walking out of the scheme.

Investors should keep track of its performance for at least 6 months and if still, it remains low, then exit can be an option.

3.Rebalancing the portfolio

There are many factors such as increasing age, sudden bonus, etc. that may potentially become incompatible with the current investment portfolio.

Or if a person has a considerable portion of his investments in equities, then he/ she may look up to redeeming his funds, to devote some finances into debt funds as well.
This is done to reduce risk largely associated with ELSS type mutual funds.

4.Change in the investment mode

Every mutual fund adheres to a particular way of investment such as, value, blend, or growth.

The collected reserves are allocated into various monetary instruments in alignment with the respective styles of the mutual fund.

However, these can be changed due to different reasons, e.g., the fund manager is changed who decides bring some reforms to increase the yields.

Moreover, it can be carried out by the fund house itself to raise their profits.

In such instances, it is favoured that a person should either quit the mutual fund or rebalance their investment portfolio to align with his risk capacity.

5.Fundamental change in the fund

Any mutual fund holds an objective which is principally followed while moving the assets into different securities.

However, if the basic attributes of the company undergo any considerable change such as termination of joint ventures, merger/ demerger of AMCs, then an investor can opt for exit.

This is done because the investment goals of a person get tampered if there are any fundamental changes imposed in the fund.


Mutual funds are a great investment option especially when it comes to long- term investment goals.

However, as it is usually done during the lows in market figures, that people make exit out of the funds. Instead, as sensible investor one must follow best of the financial advice to reap most benefits.

Further Reading:


Team R Wealth

Team R Wealth

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