This article will share something slightly different and that is known as how to exit a mutual fund? Or when to exit a mutual fund?

 You May have heard from lots of people who have told you when to invest, how to invest, and where to invest? But no one tells you when to exit? How to exit? How long should I stay invested in mutual funds? And what do you need to plan when you exit. Just like how there's a plan to invest, there is also an equal amount of planning required when you exit a fund as well. 

 So in this article, we're gonna actually tell you about how to exit the mutual fund and when to exit a mutual fund and other questions like Can I exit from mutual funds anytime?. So now I'm gonna tell you a few reasons which actually explain when you need to exit a mutual fund and if you see these reasons you should exit at that point. So let's look at the reason.

 1. Constant Poor Performance 

 If your fund is consistently giving you poor performance, you need to exit that fund. Now, what do I mean by consistently giving a poor performance? And How do you check the consistency of a mutual fund?

 If you have a fund that is constant returns are constantly going downwards it's not going upwards then it's obvious that you need to get out of this fund and find another fund to invest in. If the fund has gone down in a one-month time frame like in the last one month it went down by two-three percent don't feel scared about it, you need to give it enough time to perform. 

 The second thing that you need to look at is how is it compared to the other funds, if all the other funds in the same sector have given very good returns, but your fund is not given that good returns then it might be time to consider moving it to another fund.

 The third thing or the worst thing that could actually happen is if your fund does not outperform the benchmark index fund, and you've got lower than the index, So the fund isn't doing really, really well, and you need to exit at that point.

 There are many reasons why the fund is not performing well. The fund might have invested in some kind of sector or some kind of company in a particular sector, and that sector might just have a bad time. And that particular sector, might be going on a downward spiral and your fund is actually invested in that and if that happens it creates an issue for your fund and indirectly creates an issue for you if that is in an equity fund.

 But if it is a debt fund they might have invested in low credit-rated securities and might have failed to earn higher returns as planned or as expected, so when things like that happen you need to check how is it with respect to the index fund and is it giving good returns with respect to all the other funds in the market if it is consistently giving you bad returns then it's time to exit.

 2. Investment Objective

 The second reason why you would want to invest or when to invest in the mutual fund is with respect to the investment objective. What is the investment objective? The main investment objective is why did I invest in this mutual fund? And When do I invest in a mutual fund? We ensure that your investment objective is in line with the fund, maybe they're moving in from a diversified equity fund to just a pharma concentrated fund. 

 Now it might give great returns, but the risk also might be quite high and that is not in line with my investment objective maybe you are investing this for your retirement, and you don't want so much volatility in life so when something like this happens it is best to step away from that fund if it moves away from your investment objective.

 If you think like risk in this is, and maybe they've just merged into another fund  and the two funds have the same risk profile, and it is in line with my investment objective then you'll be like that is okay I can still stay invested but if it goes against your investment objective, and it becomes little riskier then should go and find another fund that is in your risk profile or that is in your investment objective so when the fund changes its objective accordingly you need to change the fund as well so that is when you exit the other fund 

 3. Portfolio Rebalancing

 The third thing very important is something known as portfolio rebalancing. What is portfolio rebalancing? In the beginning, let's say you want to have an equal allocation of equity and debt, so you invest 50 in an equity fund and 50 in a debt fund now what happens is YOU KNOW with the recent bull run that's going on.  Obviously, the nav of your equity part would go up more, so equity will take up more than 50 and debt will slightly take up less obviously because the bull run is going on. Now when that happens you might think no this is not good for me and I want an equal allocation in equity and debt, so I need to rebalance it.  

 If something's gone up to 70 and the other one is only at 30 maybe you need to slowly rebalance it. Rebalancing is nothing but YOU KNOW removing something and adjusting it somewhere else it's not putting it back into your bank account, it is rebalancing the allocation. Because maybe equity went 70 and debt 30 maybe you don't want that so much. So you make equity 60 and debt 40. You are just rebalancing, so that is when you usually exit a particular fund when it goes out of proportion within line with your investment objective 

 4. Achievement of Personal Finance Goal

 Another reason that might be there for you to exit a fund is the achievement of your personal finance goal. What is an achievement or personal finance goal? We all invest for some reason, maybe for some emergency fund or maybe for an investment objective. YOU KNOW you want to buy a house, so you might be investing for this, or maybe it might just be as simple as YOU KNOW it just you want a nice amount of money when you retire and after your retirement, you want a good amount of money in your bank account to live a peaceful happy life.

 Now imagine you're investing from day one, and you're accumulating your funds, and now you're almost close to retirement, and you have reached this point where you're almost close to retirement and now just before retirement, you might see that the market is very volatile all the savings that You've done from the last 20 to 25 years might just go down because the market might go into a crash it is a possibility right, and you don't want to be in this volatile market because now you want to enjoy retirement so at this point there is something very beautiful there's a very new technique that has come out quite recently it's come out it's known as SWP or also known as systematic withdrawal plan.

 Withdrawal prime means removing the funds so instead of just selling everything right at one go and putting it into your bank account, what you can do is you can do a systematic withdrawal plan whereas you can tell the equity fund put a standing instruction saying that transfer some money from your current equity fund and put it into a liquid fund every month take a particular amount or sell a particular number of units and put it into a liquid fund which is safer for you so that is something that you can do so as soon as you are coming close to achieving your personal finance goals, and you want to remove it. You can remove your money that's when you exit a mutual fund but again do it with a plan read up about systematic withdrawal plan and see why that is more important than just removing your money upfront that is a very important factor 

 5. Change of the Fund Manager

 Another reason why you might exit a mutual fund is with the change of the fund manager, and this is very important. Every mutual fund is run by a fund manager. The success or failure of a mutual fund depends on the fund manager itself. Some mutual funds are very successful only because of the fund manager not because of the fund house but maybe because the manager who's running it is very famous now what happens if suddenly the fund manager is changed at that time what happens if the fund house changes the fund manager, and he leaves or what happens if the fund manager tomorrow decides that what I'm gonna play a little riskier I'm gonna change my strategy, and I'm going to have a more risky profile now when that happens and the performance of the fund might decline than that is the time you need to exit the fund either when the fund manager actually gets changed or if his new approach might not be in alignment with your new approach so that is when you say okay I'm done I need to exit this and maybe invest it back into something else.

 6. Profit Booking

  This is very important because a lot of you have the same question is when do you exit a mutual fund when it's profit booking time. We all know like profit booking is such a topic that nobody knows when is the right time, right place and nobody can predict when the right time right place is for a profit booking. But what you can do as an investor's journey that you are investing, there are a lot of opportunities for you to exit and get amazing gains in the stock market. Obviously, if you invest for a very long period of time you will make better returns, but then there are times there are these weird conditions in the market there are economic conditions or market conditions from time to time that will keep coming that might trigger you to book the profits and trigger you to be like to take your money out.

 So let me give you an example now if you look at India and if you look at the INR sometimes what happens is a weak rupee if the rupee is weak it is beneficial for the IT sector because they deal in exports so if the rupee is weak they get more money from dollars, and they make a lot of money but what happens is when the rupee is weak for a long time and dollar keeps increasing but then suddenly there is a cycle curve where the rupee start becoming stronger and the dollar keeps going down so when rupees starts becoming stronger that's time you know that the IT sector is not going to do well.

 So you will think that time you should book your profits of whatever you have in the IT sector and reallocate them somewhere else that is when you do profit booking obviously you can't time the market you don't know when it's going to go up and when it's going to go down but when you see a trend in this way, you can see that it is not suited for any particular. At that time remove it to put it somewhere else don't take it out and enjoy just reinvest it somewhere else into a different sector, so it is more like your profit booking and rebalancing at the same time so that is when you profit book at when and exit a mutual fund at that point 

Conclusion

 How to exit? When to exit? And can I exit from mutual funds anytime? Here is some point when you want to exit how to do it in a very systematic and planned way. So we will look at an exit plan now there are two-three ways you can look at an exit plan depending on how you want to exit and what are your goals for exiting.

1. Reached Financial Goals 

 Now the first thing would that imagine you are exiting a mutual fund because you've reached your financial goal because you have come towards the end of your financial goal in the next two to three years. You are going to retire, and you want to get your money out right now what you need to do is before you reach your retirement goal maybe two years or maybe three years start making a plan. 

 You have built a corpus of say 10 lakhs now you want to remove this money so maybe every three months you are gonna remove money and put it back in some other fund or in any other investment or in a liquid fund. If you are not aware of what it is but make a plan, don't just say I'm gonna remove all this money and keep it in my bank account because you need to grow your money even after retirement as well right. So don't remove it suddenly and use it for your benefit and enjoy but make a plan according to it.  Now, what other thing is that you can do if you're selling a mutual fund. So the first point is like reaching my retirement goals, or I'm reaching this financial goal, and I'm making a plan to systematically exit it out.

2. Profit Booking

 Now another reason why you might be exiting is if you're selling your entire mutual fund to book profit if you're booking profits you do the second step if you're booking profit you need to make it very clear that if I'm profit booking where does that profit go that should be your planning. 

 Let's assume You made two lakhs in profit, and you want to book this profit, and you are selling the thing just to get the gain of 2 lakhs as soon as you book this profit you need to figure out where can you take these 2 lakhs and reinvest it in the market do you put it back into your other existing investments you profit book from the ones that did really well and maybe reinvested in the other ones that you might not do well but will do well later that is a possibility or, you rebalance your portfolio little, a bit so whenever you are booking profit you need to make a plan as to that profit that you are booking where is it going, how is it going and how to use it efficiently.

3. Rebalance Portfolio

 Now the third time okay that was profit booking now you might want to invest as I mentioned before was when you're rebalancing your portfolio. You are selling it to rebalance your portfolio. Now you should have a rebalancing plan. Rebalancing a plan again is very important so you need to make a plan every time you rebalance where will that extra money go and how do I rebalance It depends on what is trending on a sector-by-sector basis and on interest rates based on current market conditions.

4. Systematic Transfer Plan

  Now there is another system that you can use here a new system that was created again quite recently and this is known as a systematic transfer plan. Assist STP or systematic transfer plan now what systematic transfer plan basically says imagine I've invested in an equity fund and I'm seeing that bull run is slowly getting over and, I think India can change interest rates which can make bond rates or debt funds very attractive so what would I say that okay I have to say one lakh in my mutual fund and with the same company with the same asset management company you have another debt fund so do one thing I will issue a systematic transfer plan to withdraw 10,000 every month from my one lakh fund and start putting it in your debt fund in the same company so that they can transfer So you don't need to sell and buy again here, as you are, please transfer your funds from this fund to the same companies, this one right from equity to debt.

 So you can do a transfer of that so if you're rebalancing you can do a rebalancing from that anytime you think oh maybe it's something's gone up by 10 to15 percent I want to rebalance again rebalance from a systematic transfer plan this is something that a lot of people do that is something that you can do as well as when it comes to opting out of the plan.

  As I said very few people in the market actually talk about when to exit a mutual fund and moreover than when to exit how to exit with a plan we all make a plan to invest in the market but when it comes to exiting everyone's scared everyone doesn't understand when to exit they might be like what is the market going to crash should we exit right now, but it's not only those factors there are so many factors that we mentioned right market conditions might be changing interest rates might be changing the sector might be not attractive any more even the dollar rate INR dollar rate might affect some sectors as well so 

 Just a disclaimer any stocks or fund that have been mentioned in this ARTICLE is only for educational purposes we do not recommend a buy or sell in anything investments in the securities market are subject to market risks read all the related documents carefully before investing please read the risk disclosure documents carefully before investing in equity shares derivatives mutual fund and or other instruments traded on the stock exchanges