Investing in Mutual Funds
Having made an investment in a mutual fund, you should monitor it to see whether its management and performance is in line with stated objectives and also whether its performance exceeds or lags your expectations. Unlike individual stocks and bonds, mutual fund reviews are required less frequently, once in a quarter should be sufficient.
A review of the fund’s performance should be carried out with the objective of holding or selling your investment in the mutual fund. You might need to sell your investment in a mutual fund if any of the events below apply –
You change your investment plan.
For example, as you grow older you might adopt a more conservative investment approach, pruning some of your riskier (equity-oriented) funds.
A fund changes its strategy.
A fund that alters its investment objective or approach might no longer fit your strategy.
The fund's poor results persist.
If a fund regularly trails other funds that invest in similar securities, consider replacing it. The poor performance is more often than not a reflection on the relative expertise of the asset management company.
By now you would have realized that investing in mutual funds is not just a decision but is more a process. moneycontrol's Mutual Fund Investing Checklist can help make this process easier and more efficient.