Picking a fund is really easy – Steps followed by a common investors : -
You would go to a website then check various funds ratings and its past performance statistics and you end up with a fund under your belt. The amount of research while selecting and finalizing a fund would vary depending on your level of understanding. But still in the end you would select a fund and justify your selection and begin your investment journey. All said and done the bigger question that we never encounter in the matters of personal finance is when do we really exit a fund?
Fluctuations, fluctuations and bigger fluctuations defined by big market movements really scare the common investor a lot. These days many are worried with their day-to-day returns! As in many blogs these questions are posed a multiple times. People really start fearing what’s next? Shall I redeem now? What do I do? Everyone start trying to safeguard their falling investment value and starts wondering shall I press the panic button!!
Well that’s exactly what you should refrain from doing in times like this. The whole idea of investing is to optimize your returns and maximize it by a margin
Market movement should not be the driving force for you to redeem your funds. Please note this is very much an intrinsic nature/trait of the market. They keep fluctuating in varying degrees. You need to stick to these market ups and down.
1. The very primary reason why you should sell a fund is because you need your money. It’s as simple as that irrespective of the market movement.
2. When you are restructuring/re organizing your portfolio. Why because you’re needs/your goals/ your requirements have undergone a change over a time period so you would dump few funds and select those funds which are more appropriate for your current situation in life.
3. When your funds are doing badly over a longer time period. The time when you had invested you were pretty okay with the fund style but then it gradually changed its fund structure and started performing badly, another couple of years the fund lost its sheen. You should note that a fund cannot be solely judged based on a single market fall since there are many funds which would have given negative during the same time period. If this falling returns cycle remains the way in different market conditions then is the time to dump it. (Please do check the statistics though). If you are only trying to time the market well you will always have a lot of catching up to do. Markets will go down dramatically. Market fluctuations should not be the reason for you to sell. If that was the case and you are a risk averse investor)at the first level you should better remain with fixed income instruments provided by Banks like FDs/RDs/time deposits etc.
4. If you reach your goals simply sell your funds and redeem it. If you don’t set out any goals for yourself then it’s another story. But, if you have a specific goal in life with a defined time frame and a target amount and you have reached your goal redeem it friend. Don’t be greedy at that time.