Selling A Mutual Fund

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Selling a mutual fund is a strategic decision for any investor. A common mistake is to treat mutual funds similar to shares and selling off a mutual fund to buy a cheaper one. This might result in the selling off of a high-value portfolio with good growth prospects. Mutual fund may be sold due to certain important considerations on the part of the investor.

Possible Reasons for Selling a Mutual Fund-

  • A financial need can lead to the selling of a mutual fund. An investor may sell off a mutual fund to meet some financial requirement.

  • Certain funds prove to be poor performers when compared to the highest performing ones - There are some mutual funds who are considered as good performers if calculated on an average return basis. But these funds when compared to the top performers are found to be poor performers. In that case, if a fund is consistently performing below the benchmark, then it is advisable to sell it off and turn to a better fund.

  • Re balancing the portfolio - A change in financial status leads to the re balancing of a portfolio. Selling of the equity and reinvesting in debt securities restores the original balance.

  • Change in the policy of taxes - When the taxation policy changes at any point of time, its better to sell of the fund.Change in the fund size- Sometimes the fund size tends to change and this affects the return to a great extent. Therefore when the fund size gets too big to manage or too small to capture, it is the best time to sell the fund.

Last Updated 06/30/2011

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