1. The fund loses more than it should :Suppose a bond fund loses more than 23 per cent in a year in which its average peers suffer a much slimmer loss
2. The fund gains more than it should:This might sound illogical -- after all, who complains about great returns? But if your "moderate" balanced fund posts a 60 per cent return when its average peer is up 10 per cent, maybe you don't own what you think you do.
3. The fund changes its strategy: presumably, you buy a small-cap fund because you want exposure to small-cap stocks.If the manager suddenly starts buying large-cap stocks, you may have a problem.
4. The fund underperforms for a long period: While one year of underperformance may be nothing to worry about, two or three ugly years can get frustrating. The urge to sell intensifies.Before pulling the trigger, be sure you're comparing your underperformer to an appropriate benchmark, such as its Morningstar category peers or a suitable index. Before you pass judgment, make sure the manager or strategy hasn't changed.
5. Your goals change: As your goals change, your funds should change as well. Suppose you start investing in a balanced fund with the goal of buying a house within the next five years. If you get married and your spouse already owns a house, you may decide to use that money for retirement instead. In that case, you might ditch the balanced fund for a pure stock fund.
Interesting conversation for Redeeming Mutual Funds:
Whether to Redeem HDFC Top 200
http://www.jagoinvestor.com/forum/hdfc-top-200-has-the-sun-set-now/9138/#comment-29968
2. The fund gains more than it should:This might sound illogical -- after all, who complains about great returns? But if your "moderate" balanced fund posts a 60 per cent return when its average peer is up 10 per cent, maybe you don't own what you think you do.
3. The fund changes its strategy: presumably, you buy a small-cap fund because you want exposure to small-cap stocks.If the manager suddenly starts buying large-cap stocks, you may have a problem.
4. The fund underperforms for a long period: While one year of underperformance may be nothing to worry about, two or three ugly years can get frustrating. The urge to sell intensifies.Before pulling the trigger, be sure you're comparing your underperformer to an appropriate benchmark, such as its Morningstar category peers or a suitable index. Before you pass judgment, make sure the manager or strategy hasn't changed.
5. Your goals change: As your goals change, your funds should change as well. Suppose you start investing in a balanced fund with the goal of buying a house within the next five years. If you get married and your spouse already owns a house, you may decide to use that money for retirement instead. In that case, you might ditch the balanced fund for a pure stock fund.
6. You can’t take it anymore
The point of investing is meeting financial goals, not developing mental stress. If your fund is so volatile that not even the vision of your brand new house calms you down, then by all means sell -- as long as you'd never buy the fund or a fund like it again.
The moral: Know your funds, know yourself, and never make the same mistake twice.
Interesting conversation for Redeeming Mutual Funds:
Whether to Redeem HDFC Top 200
http://www.jagoinvestor.com/forum/hdfc-top-200-has-the-sun-set-now/9138/#comment-29968
