8 Strong Reasons to Sell Your Mutual Funds

8 Strong Reasons to Sell Your Mutual FundsStrong Reasons to Sell Your Mutual Funds

I keep telling you how to invest in top performing mutual fund schemes. However, one should even know when to exit the mutual fund schemes. There are several triggers that suggest you to sell your mutual fund schemes. Why there is a need to withdraw or sell your mutual funds?  If you can plan it well, you can sell your mutual funds at specific point which would benefit you. What are the 8 Strong reasons on which you should sell your mutual fund units? Are there any alternatives instead of just selling your mutual funds?

Also Read: Top 10 SIP Mutual Funds to invest in India in 2018

Overview about Mutual Funds

If you are already aware of this, skip this section. Basically, mutual fund is a professionally managed investment scheme in which the funds of investors are pooled and invested in stock market, money market, securities etc. Every investor owns a portion in the fund in the ratio they have invested. They are usually run by asset management companies. There are many types of mutual funds available in the market. Every fund bears different risk and reward profile.

How do you invest in Mutual Funds?

There are two ways to invest in mutual funds:

Lump sum investment – It is a one shot investment. If one invests the entire amount he/she wishes to invest in a single go, it is known as lump sum investment.

SIP every month – SIP or systematic investment plan is an arrangement in which a pre-determined small sums of amount is to be paid at a regular interval say daily, weekly, monthly, quarterly, etc. it is a more systematic approach to investment.

Why there is need to withdraw mutual fund investments?

Well !!!  There can be several reasons to redeem the mutual funds investment.  Many people redeem mutual funds when the market seems to be negative in the long term. Redemption involves meticulous research about the market conditions as mutual funds are managed by professionals who have already factored in the market situations in advance.

8 Strong Reasons to Sell Your Mutual Funds

Here are the few solid reasons you should sell your mutual funds.

1) When markets are at peak

When the share market reaches its peak, the mutual funds generally fetches good NAV. If you have been investing for long term, it may be the time to book profits by selling your mutual fund units. There is no hard and fast rule about what you term as market peak. Any market peak which is 52 week high could be an opportunity to book profits and you can look at selling your mutual funds.

2) 1-2 years ahead before you need

Mutual funds are good saving schemes. People should redeem them when they are in need of money like education of children or their marriage which are very expensive affairs these days. However, don’t try to sell your mutual fund schemes just as and when you need. E.g. If your daughter marriage is in 2020, don’t sell your mutual fund at the fag end. Try to check the stock markets and try to sell them 1-2 years ahead of the marriage. Similar way if you invested in mutual funds for child education, try to exit little ahead of time.

3) When you reached financial goal

One may redeem mutual funds once their financial goal is achieved. Many people invest in mutual funds with a mind set of certain returns. Once they achieve those returns, they redeem them. E.g. if you want to accumulate Rs 25 Lakhs for your child foreign education. You should sell your mutual fund units and keep them safe so that it is used for the actual purpose. Markets might be peak and then take correction. Your fund can underperform later on. Hence it is always best to take out your money from mutual funds if you achieved your financial goal.

4) After lock-in period

There are ELSS mutual fund schemes which has 3 years lock-in period. If your aim is just tax saving and if you got good returns, you can sell your mutual fund schemes as soon as the lock-in period is over. You can sell them and invest in another ELSS tax saving funds and get tax benefits for that financial year. However if you are comfortable with existing mutual fund schemes which might provide good returns, you can continue to invest.

5) Sell mutual funds only after medium to long term to get highest returns

Equity Mutual funds do well in medium to long term. No point in investing them for short term. You should invest atleast for 8-10 years to get good returns. Once this period is over, if you need to utilize such funds for a purpose, you can sell such mutual fund schemes.

6) Your MF Scheme is underperformer

You would have invested in good mutual fund schemes. However after few years your mutual fund would have become underperformer. You should wait for 1-2 years to check the performance and sell such mutual fund schemes. One should invest in top rated mutual funds to avoid this scenario.

7) Change in your risk appetite

If your risk appetite has changed, then you should check the mutual fund schemes you invested and sell those which does not meet your risk profile. E.g. you might be high risk appetite person. You would have invested in sector funds or midcap/smallcap mutual funds. However, if at later point of time, if you believe that you are taking high risk and want to shift to moderate to high risk taker, you should sell such mutual fund schemes. You can invest in large cap funds or diversified which are less risk compared to sector funds or midcap/smallcap funds.

8) Meeting your financial emergency

You would have invested in mutual fund schemes, however there is financial emergency for you. In such case there is no choice except to sell your mutual fund schemes. To come out from such situations, one should invest some emergency money in liquid funds / debt mutual fund schemes.

How to withdraw your Mutual Fund Investments?

Redemption of mutual funds can be as simple as a single click or a phone call made to your broker. For online redemption, you just need to visit the website and follow the instructions given.

For off line redemption, you need a redemption request form, fund name, folio number and the number of units you hold and wish to redeem. You have to fill the form and submit it to the agent. After verification of signature and bank account, the proceeds are transferred to your bank account within 3 working days.

Which NAV is applicable if you sell your mutual funds?

The time at which the redemption request is received is very crucial as the NAV (net asset value) of the same day is applicable only when the redemption request is received before 3pm. If it is received after 3pm, the NAV of next day will be applicable. Once the request is successfully received and verified, it takes three working days for the amount to be credited to your bank account.

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Strong Reasons to Sell Your Mutual Funds


  • Sumit

    Dear Suresh,

    I regularly follow your articles and get valuable information and ideas regarding my investments.

    Can you please post some article with your views on GILT funds. Recently they are not performing as before and many funds in that category are giving negative returns in 3 to 6 months period. Your suggestion on this will be greatly appreciated.




  • Kshitij

    i have 3 sip of 1kmonthly in kotak select focus, l&t prudence fund and mirrae bluechip emerging nad also a lumsum investment in DSPBlack rock Nifty 50 Fund this is direct investment through online transaction.

    any other ideas for my portfolio. i expected 20% yearly returns .

  • Jagan

    Hi Suresh

    I have been following your articles from 2013. Started SIP from 2013. All the funds invested ( ICICI Blue chip, HDFC Mid cap,Birla fronline, Franklin Smal growth,SBI Blue chip etc.) are doing good. In the same period started with Reliance equity Opportunity fund. Annulaised returns is 12.39 which is less compared to Others. ICICI research also recommends this to be sold.

    If i plan for STP ( as this can be done within same AMC) then  suggest if can do that for Reliance small cap fund (G) as it seems giving a consistent returns.

    Thanks in advance for your help.



  • Thakor Prajapati

    Sir.I am yr old.I can work for 5 years next.I want to invest 10000/- month. Which MF is best for me?

    • You can look in these funds. 1) Large cap – Birla SL Frontline fund / ICICI Pru focussed blue chip fund 2) Balanced – You can check HDFC Balanced Fund / ICICI Balanced fund. 

  • chander shekhar

    NICE and very educative article.
    its new for me and thanks that now i can make a decision after cheking my portfolio

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