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

Suresh KP


  1. Hello Sir,

    i am 31 and own following MFs through monthly SIPs (all direct growth options) since last 2.7 years. Planning the same for long term. I need reconsideration on portfolio if at all required as I do not see good growth in portfolio. plz suggest how should I proceed,

    SBI Pharma – monthly 4k

    ICICI Pru Exports & Other Services – monthly 5k

    DSP BR Micro Cap – monthly 5k

    Axis ELSS – monthly 4k

    ICICI Money mkt fund (liquid) – monthly 30k (so far INR 745000 invested)

    1. Good funds. However some of the funds like SBI Pharma, DSP BR Microcap are high risk. If you are risk taker, invest in them. Otherwise, you should invest in large cap and diversified mutual funds

      1. Thank You Sir,

        Would you advise hoding SBI pharma for some more time as it is in loss and sector may perform well in future?

        Also I need your advise on ICICI Pru Exports & Services. Do I need to switch to some other fund in the same category as this fund is not giving promised returns or should I hold it for some more time?

        Please advise sir!

  2. Hello Sir,
    Below are my Mutual Fund investments

    Previous Mutual fund investments : Current Value
    32-HDFC TaxSaver – Growth: 168,000
    L&T Tax Advantage Fund – Growth: 30,713
    ICICI Prudential Mutual Fund Tax Saver: 34,000

    I have following SIPs underway since 3 months
    Kotak Select Focus Fund – Direct Plan – Growth – Rs 4000/- per month
    Axis Long Term Equity Fund – Regular Growth – Rs 4000/- per month
    Mirae Asset Emerging Bluechip Fund Direct Plan- Growth- Growth – Rs 4000/- per month
    Aditya BSL Tax Relief 96- Direct Growth – Rs 4000/- per month

    Please guide how best should I fine tune my portfolio.

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