When to Sell your Mutual Fund Investments

Fund Investments

Today, most of us have chosen to start investing in mutual funds. The internet has brought us closer to so many more things than we can actually imagine. Though it could be a tedious task to know how the stock market works, how to go about, and much more – we still need to invest, right? If not now, then when? But since we learn what the stock market is so fast, it’s quite hard to absorb all of the factors together. Though we get through on the how to buy, how to sustain, and so many things, we leave out the part on when you sell. So, here we go – let’s find out when it is time to sell the mutual funds.

Why Sell?

You naturally expect certain returns whenever you put your money into any kind of product. This is entirely dependent on your personal choices. You might be advised to sell your mutual fund units if your investment is producing lower yields than you had anticipated. Investing in different financial goods is always an option. On the other hand, because the rate of return can be high, you might be tempted to consider alternative mutual funds. There are benefits and drawbacks to redeeming mutual fund assets, though.

However, there are some situations in which you can benefit from the liquidation of money.

When Do You Need to Sell Your Mutual Funds?

1) Once the Job Has Been Done

Your careful investing strategy has at last paid off. Your investment goal has developed as a result of your consistent saving over the past few years. The main justification for selling your mutual funds is this.

You might succeed in achieving your goal before the target date if your equity funds produce higher returns than anticipated. Once more, you have the option to sell your equities mutual fund units and invest the proceeds in low-risk assets like liquid funds. This will keep the portfolio’s worth intact until you need to remove money from it to pay for the goal.

In an emergency, you might also have to draw on your mutual fund holdings. It would be wise to withdraw money during such times from low-risk assets first – like liquid funds and short-term debt funds – before turning to riskier equity funds. Because if equity markets are low during an emergency, you can wind up withdrawing at low returns and miss the chance for future better gains.

2) When Everything that the Fund is Going Through is Not Too Well

Everyone makes errors. Your mutual fund investment can fall short of your expectations since you either made a mistake when you first made the investment, or the performance of an otherwise excellent mutual fund started to decline.

You might have put money into a themed fund or a sector fund in anticipation of high returns. However, you would be extremely upset if the sector underperformed. You can have erred by taking excessive risks or by not diversifying your portfolio enough. You might need to sell your funds and buy better-performing, diversified equity funds in order to get your portfolio back on track.

Even carefully chosen mutual funds might occasionally perform poorly. It’s possible that the fund manager’s investment wagers didn’t produce the best results. Before discontinuing the mutual fund plan, you should evaluate the performance.

3) When there is a Sudden Change

The mutual fund sector is constantly evolving. No matter if the changes are made at the macro level, where policies are adjusted, or the micro level, where the core characteristics of a scheme are changed. Such changes might persuade you to sell. However, you must first evaluate the long-term effects before proceeding.

4) When You Find Something Much Better

You might have begun investing in mutual funds through tax-saving programs like Equity Linked Savings Schemes (ELSS). You’re not sure whether to hold or redeem, though, now that the three-year lock-in term has ended. While certain tax-saving strategies have outperformed the market and competed favorably with open-ended equities diversified strategies, the majority of other strategies have failed (even though they may rank among the top in the ELSS category). As a result, you might think about transferring from an ELSS to equities diversified plans that perform better.

5) When You Have Got to Do Some Rebalancing

Setting the appropriate asset allocation and routinely rebalancing your portfolio are crucial components of financial planning that guarantee your financial security. Therefore, if you have established an asset allocation with the assistance of a financial planner based on your risk profile, investment goal, and time horizon, you must periodically review it and rebalance the portfolio.

6) When It Gets Out of Hand

The performance of a fund may occasionally suffer if it experiences rapid expansion. It grows harder for a portfolio to shift its assets as the fund gets bigger. Typically, targeted funds or small-cap funds experience this problem since they either invest in equities with low volume and liquidity or deal with fewer shares. It is better to sell your mutual fund units in this situation.


It isn’t always easy to know when it is the right time to leave a fund, is it? Not everyone is Warren Buffet. There are times even he wouldn’t know when to leave. So it is completely fine not to know. But, do you know what is not found? It is not found to stay in that unknown place. There are times when we need to seek expert help to make solutions, and there are times we can figure this out just with a little bit of analysis.