You might consider redeeming your mutual fund investments in several cases. For instance, if you’ve achieved your investment goals or have an emergency that warrants redemption. Of course, there are other reasons too. We’ve discussed some of them in detail below.
Change in the fund's asset allocation pattern
Every mutual fund has an asset allocation pattern for investments and risk profile. It may invest in small-cap, mid-cap, and large-cap companies or debt instruments. The plan is laid out to investors, and the fund must stick to it. However, a fund might change its allocation plan When it does, you have the option to exit, if this no longer aligns with your risk profile.
Consistent poor performance by the fund
Mutual fund investments can create wealth. They can help you earn returns within the scope of your risk profile. However, funds may sometimes underperform for a sustained duration, even under good market conditions. When that happens, you can proceed with your mutual fund redemption as it may be prudent to exit from a consistently underperforming fund.
Change in the fund manager
Fund managers are market experts who manage mutual funds and ensure they meet investors' targets. They track the markets regularly and make the necessary adjustments to their strategy, helping investors earn returns. Hence, having the right fund manager with a proven record is extremely important for your investment goals.
If a fund manager with a good record leaves the fund and a new fund manager is appointed, you can stay vigilant. You can track the fund’s performance for a few months and see if the new manager can deliver the same performance as the previous fund manager. If not, you can consider redeeming your investments.
You have achieved your goals
You can tie your investments in each fund to a goal. It could be buying a house, overseas education, or an international trip. If any objectives are met, you could redeem your mutual fund investments.
However, remember that you do not need to redeem your entire mutual fund portfolio if one of your funds has achieved its goal. You can redeem your investments in one fund and keep investing in the rest until they reach your targets.
You are in an emergency
Mutual funds can be used for creating wealth, but life is uncertain. A challenge could arise anytime and test your financial strength. This is where an emergency fund comes into the picture. If a problem arises, you can redeem your mutual fund investments. However, you must try to build an emergency fund to cover unexpected expenses.
How to redeem your mutual fund units?
You can complete the mutual fund redemption process in several ways. You can sell your mutual fund units directly through AMC's website or visit their Investor service centres. If you have your mutual fund units in DEMAT mode, you can sell through your Depository Participant (DP) or stockbroker.
However, if you do not know how to redeem your mutual fund units, you can do so through your mutual fund distributors. You might have to fill out a redemption form and hand it to them. They can process the same at the AMC’s office and help you redeem your mutual fund investments.
Mutual funds can create wealth. Continuous investment in the right fund for a few years can elevate your financial position, bridging the gap between you and your dreams. Therefore, you could try to avoid redeeming your investments in the right fund unless you are in an emergency. Also, remember that you may have to pay an exit load if you redeem your mutual fund investments within a certain duration. It is deducted from your returns, and the value varies from one fund to another.
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.