A mutual fund scheme, where one expects to make decent returns, is usually meant for the medium to long term. These are mostly equity-oriented schemes, and at times can be debt-oriented schemes.
Equity schemes, as we know, are linked to markets and debt mutual funds are pooled assets that invest in fixed income securities like bonds, government securities, and Treasury Bills.
The main question here is that once a decent return is made on a mutual fund investment, should one continue to hold, sell some or sell all?
Also read: How are debt investments taxed?
The answer to this question, according to Yashpal Sharma, Vice President of Taurus Mutual fund, depends on the investor’s original investment goal, risk tolerance and current circumstances.
“An investor must consider these points and discuss with their investment advisor, assuming they have one,” Sharma says.
“Typically annual returns from equities over a long period, say 10-20 years, can range between 10-15 percent. If this or even better returns are achieved in a much shorter time frame then it’s advisable to at least book profits and park these funds in a safe avenue,” he suggests.
He, however, warns against reinvesting these profits in a risky avenue.
As for the question of whether the individual should continue with his/her investments, Sharma said that it will be decided based on the risk appetite and the future outlook on the economy in general.
For others, it is the market environment that decides what they should do with their funds.
Overall, while investing in mutual funds, it’s crucial to strategize funds to financial goals and consistently keep a check. The fund’s strategy should be aligned with one’s goal.
According to investment platform Groww, selling mutual funds make sense when the goal has been achieved.
“The funds can be sold when the objective of the investment is accomplished. This is the usual investment perspective of most investors and it is an apt reason to sell the mutual fund,” it said.
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