How to redeem your mutual funds
The Hans India spoke to Jyoti Bhandari, Founder and CEO of Lovak Capital Pvt. Ltd on what are the ways through which women can redeem their mutual funds
Women have been an important part that is equally contributing to the economy for the past many years. Women are capable enough to earn their standard of living and invest their money smartly. Women have started investing their money in various mutual funds or by other means, but what happens when markets are falling? A majority of women panic when markets are falling and want to sell off everything in their portfolio. If you are one of them, think again.
Especially, if you have invested in a systematic investment plan (SIP), a single spell of volatility should not worry you. With SIPs, you reap the advantage of rupee cost averaging that keeps the volatility under check. This means you accumulate more units when markets are falling, and accumulate fewer units when markets are high.
Instead of worrying about the markets, the following are better reasons to exit a fund:
If the asset allocation changes over time
Asset allocation involves dividing an investment portfolio among different asset categories, such as stocks, bonds, and cash. It is one of the most important decisions that investors make and rewards immensely if done wisely. Therefore, it's imperative to be aligned majorly with your goal and risk profile.
If you are close to your goal
It is always advisable to gradually transfer your funds from equity to debt instruments depending upon your risk profile when you are 2 to 3 years away from your goals which will ensure you from the sudden market crash.
If there is a decline in the performance of the fund
Many factors affect the performance of the funds like an expense ratio, fund size, cash flows, and skills of a fund manager. In general, if there has been a consistent decline in the performance of the scheme as compared to its peers for more than 2 years. You could decide to exit out of that particular scheme.
If there is any change in your goals
A major change in circumstances may alter the time horizon or targeted corpus of the goal. This may require the investor to change his investment strategy and even tweak the asset allocation.
If you have a large number of funds
It only leads to duplication and you end up buying the same stocks through other funds. Not only a large number of funds are more difficult to keep track of, but it defeats the whole diversification principle also.
If there is a change in a scheme
If the new underlying mandate in the new scheme no longer aligns with your risk profile and goals. A change in mandate means the new fund may not match the return expectation or risk profile of the investor. An exit out of the scheme is justified if there is change in the fund's risk profile or doesn't align with your needs anymore.