Mutual funds play a significant role in achieving various financial objectives in life. However, there are times when these mutual funds may prompt you to consider withdrawing your investment. Experts advise that exiting mutual funds should not be rushed; instead, it should be a careful and planned action to ensure success.
Withdrawing or exiting from mutual fund
There are instances when you should think about withdrawing or exiting from mutual funds. This will assist you in preventing stagnation of returns. Whenever putting money into a mutual fund, there ought to be a purpose for it. If the fund reaches your target, you might think about withdrawing from the fund. Regardless of whether you’ve invested to build an emergency fund, save for your child’s college education, or secure your retirement, if you’ve reached your target or are near it, you might think about withdrawing from the mutual fund. As per Kotak Securities, if your fund has been underperforming consistently for an extended period, it is advisable to withdraw from it.
If your fund has been underperforming for an extended period, you might think about redeeming it and putting your money into a more successful fund. A fund can underperform for various reasons. This may be a result of the existing economic climate, governmental regulations, or choices made by the fund manager. In light of the existing market fluctuations, it might be necessary to adjust your portfolio. To return to the initial asset allocation, you might need to divest some of your equity funds and use the funds obtained to purchase debt funds. To achieve this, you might think about pulling out from equity funds and channeling the funds into debt funds. If the main goal of a fund shifts over time and its associated risk changes as well, you may choose to exit.
SEBI revamped mutual funds in 2018
When SEBI revamped mutual funds in 2018, numerous funds were consolidated following the regulatory directive. If you believe that the goals and risks of your fund are no longer aligned with your objectives, you can withdraw your investment.
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