4 reasons that indicate it’s time to exit a mutual fund

Investors are actively opting for mutual funds and the popularity can be gauged from the figures as the Assets under Management (AUM) of the Indian mutual fund industry, as on February 28, 2018, stood at Rs 22.20 lakh crore.

As per Association of Mutual Funds in India, the AUM has grown from Rs 5.05 trillion as on March 31, 2008 to Rs 22.20 trillion as on February 28, 2018, over four-fold increase within 10 years.

There are several characteristics attached to popularity of mutual funds, such as it allows asset diversification for large and small investors. Also, they are managed by a professional fund manager, generate inflation-adjusted returns, are low cost, save time, convenient, tax-saving component, have a higher return potential, and more.

Smart investors know when to invest money in mutual funds for maximum gains, but a smarter investor knows when to exit them. There’ll be several indicators signalling you to exit a mutual fund.

Following are the red flags that you should assess and exit a mutual fund

1. Attained your goal: Investors take up mutual funds, keeping certain goals in mind. For instance, some invest in mutual funds to buy a car or for an exotic vacation. If you have attained your goal and generated amount that you wanted to attain, exit the mutual fund.


2. Change in fund manager: It is important to evaluate expertise and knowledge of the fund manager. One should check research team while selecting an asset management company. If there’s any change in the fund manager or a key personnel in the committee, you may warrant a relook at the investment.


3. Not yielding desired results: You should assess the performance of your mutual fund at regular intervals, depending on your long-term or short-term plan. If the performance is not at par consistently, you may want to re-balance your portfolio or switch to a better fund.


4. Taxation terms: If there is a change is tax policy that might have major implications, you may look for an alternative.

The objective is to generate wealth and if the fund is not aligned with your goal, you may decide to look for other options.