What is the Strategy To Exit From Mutual Funds? - Groww (2024)

In the legendary Mahabharata, an incident involving Abhimanyu teaches us a valuable lesson about mutual fund investing.

Abhimanyu, while in his mother’s womb, learnt the art of Chakravyuham when his father, Arjuna, explained it to his mother. However, Arjuna never got around to completing the story and left out one crucial aspect: how to exit the Chakarvyuham. As a result, when Abhimanyu pierced into the Chakravyuham, he found himself trapped and had to sacrifice his life.

Similarly, when it comes to mutual funds, most discussions revolve around making investments. Little attention is given to the equally important topic of how to exit and protect your money.

In this blog, we will shed light on the often-overlooked aspect of disinvestment, helping you understand how to choose the right exit strategy.

Situations Where You Could Consider Exiting a Mutual Fund

You might want to exit a mutual fund in certain situations but need help figuring out how to. You might also often wonder when to withdraw money from mutual fund.

Hence, to help you out, here are some of the most common instances and what ways you could go for in those situations:

  • Achieving Financial Goals and Profit Booking

When you've successfully achieved your financial goals or are nearing their fulfilment, it's crucial to have an exit strategy to secure your gains and manage risk.

This includes considering profit booking as part of your overall approach.

  • Assess if you have met or exceeded your target, considering factors like time horizon, expected returns, and market conditions.
  • If you still have a considerable timeframe, consider gradually transitioning from growth-oriented funds to more stable and income-focused funds.
  • If you require regular income, you can set up a SWP (Systematic Withdrawal Plan) to withdraw a specific amount from your mutual fund investment regularly, ensuring a steady stream of cash flow while preserving the principal.
  • If you have a lump sum to invest or are shifting funds from one scheme to another, utilise STP (Systematic Transfer Plan) to systematically transfer a predetermined amount from one mutual fund to another, aligning with your changing investment needs.
  • Explore other investment avenues like fixed deposits, bonds, or real estate to diversify your holdings and reduce risk.
  • Market Volatility and Risk Management

During periods of market volatility or when certain mutual funds face heightened risks, having a well-defined exit strategy becomes essential to protect your investments and mitigate potential losses.

  • Evaluate the fund's performance over short-term, medium-term, and long-term periods to identify trends and consistency.
  • Assess how the fund fares compared to its category peers and relevant benchmark indices to determine if it consistently lags.
  • If a fund consistently underperforms over multiple periods and fails to deliver satisfactory returns, consider exiting the investment.
  • Research and select funds with a similar investment objective but better track records and performance history to redirect your investments.

You may also want to know the 10 Tips to Invest in Mutual Funds

  • Changing Investment Needs or Risk Tolerance

Over time, your investment needs and risk tolerance may change due to life events, financial goals, or shifting market conditions. Adapting your mutual fund portfolio accordingly becomes crucial to align with your evolving circ*mstances.

  • Understand your changing circ*mstances, including financial goals, investment timeframes, and risk capacity.
  • Review your current mutual fund holdings and determine if they match your risk appetite and investment goals.
  • If your risk tolerance has changed, consider reallocating your investments to funds that align with your new risk profile.
  • Utilise strategies like STP to systematically transfer funds from one scheme to another, ensuring a smooth transition while optimising returns.
  • Change in Fund Attributes or Mandate

If the fundamental attributes of a mutual fund change, such as its investment style, portfolio composition, or underlying strategy, it may no longer align with your investment goals or preferences.

In such cases, considering an exit strategy is important.

  • Stay informed about any changes in the mutual fund's prospectus or disclosures.
  • Evaluate if the changes align with your investment objectives and risk tolerance.
  • If the altered attributes no longer suit your preferences, it may be wise to exit the fund and explore alternatives that better align with your goals and preferences.
What is the Strategy To Exit From Mutual Funds? - Groww (2024)

FAQs

What is the Strategy To Exit From Mutual Funds? - Groww? ›

Market Volatility and Risk Management

How to exit mutual fund in Groww? ›

Here's how to redeem from a mutual fund:
  1. Go to your Dashboard.
  2. Select the mutual fund you want to redeem from.
  3. Tap on the 'Redeem' button.
  4. Enter the amount to redeem.
  5. Tap on 'Confirm Withdrawal' The amount will take 3-4 working days to reflect in your bank account.

How to exit a mutual fund? ›

Mutual fund products essentially come with two exit options – voluntary exit at any time during the term of the fund or redemption upon maturity or after lock in. A voluntary exit (before or after lock in) may or may not have an exit load attached.

What is the best way to withdraw money from mutual funds? ›

If you invested through a broker or distributor, you could withdraw money from a Mutual Fund plan through them. Contacting your broker and requesting a withdrawal are options. You must complete and submit a withdrawal request form if you want to withdraw offline.

How to get out of mutual funds? ›

4 steps to selling a mutual fund
  1. Contact your financial advisor or mutual fund company. Get in touch with the advisor who sold you the fund, or someone in their company. ...
  2. Ask about any fees or charges. ...
  3. Decide how many units or shares you want to sell. ...
  4. Give instructions on what to do with the money.
Sep 26, 2023

Is it a good time to exit mutual funds? ›

When it comes to equity, it is very important that, especially when you are thinking about long-term goals, you want to exit as soon as you have 2-3 years left approaching your goal and there are just 2-3 years to get there.

What is a good exit load? ›

The best exit load for a mutual fund is one that is low or non-existent. The exit load is a fee charged by mutual funds when an investor sells or redeems their units before a certain period of time has elapsed. It is usually a percentage of the Net Asset Value (NAV) of the mutual fund units held by investors.

What happens if you exit from a mutual fund? ›

Mutual fund redemption is how the investors sell their fund units. However, if there is an exit load, then the investors necessarily pay it on redeeming their units. When investors redeem their units, they earn taxable capital gains. The taxability of capital gains depends on the type of fund and the period of holding.

What is the exit charge for mutual funds? ›

Suppose you redeem 500 units of a scheme 4 months after your date of purchase. Let us assume that the NAV is Rs 100. The exit load will be = 1% X 500 (number of units) X 100 (NAV) = Rs 500. This amount will be deducted from the redemption proceeds which gets credited to your bank account.

How long does it take to exit a mutual fund? ›

In Case of Emergencies

Thus, you can redeem your fund units at any time. In case of emergencies, you need not worry about timing your exit. You can simply exit the investments to meet your emergency needs. However, some funds may take up to two working days to transfer the amount to your bank account.

Does Groww charge for withdrawal? ›

Groww doesn't charge any money for withdrawals. The money will be transferred to your account through NEFT and will take 1 working day to reflect in your bank account. Was the answer helpful?

Can I withdraw all money from Groww? ›

After a sell transaction, 80% of the delivery sell amount is available for investment after 30 minutes, and the remaining 20% is added to your Groww balance by the end of the day. You can withdraw the entire sell amount after 10 AM on the next settlement day (T+1).

What is set safe exit in Groww? ›

Safe Exit is a newly launched feature on Groww, especially built for F&O traders. It is a risk-management solution that automatically triggers orders to close open positions in futures and options when the total losses for the day reach a level a trader has set.

When to cash out mutual funds? ›

  1. You may want to sell a mutual fund if it is massively outperforming its benchmark.
  2. Other reasons to sell include "style drift," you need to rebalance your portfolio or your risk tolerance has changed.
  3. The final reason to sell mutual funds is if there are cheaper options available.
Feb 7, 2023

When should I sell my mutual funds? ›

If your financial goals have shifted, it may be time to realign by selling. For example, if you initially invested in an aggressive growth fund but now require more stability and income, you might consider selling the fund shares and reallocating your investments.

What is the best time to redeem mutual funds? ›

Redemption is usually done when the investor needs funds, the objective of the investment is fulfilled, or when the financial plan review demands a change in allocation, or the scheme is not able to deliver desired results.

Can I withdraw my mutual fund anytime in Groww? ›

Yes, you can redeem your mutual fund investments any time you want. Groww does not charge for this.

What is exit load in mutual fund Groww app? ›

An exit load is the fee AMCs (Asset management companies) charge the investor at the time of exiting or retrieving the units of the fund. The primary reason for levying exit load is to discourage investors from backing out and pulling out their investments before the lock-in period is over.

Can I close my mutual fund account online? ›

Yes, most mutual fund companies provide the option of cancelling SIPs online through their websites and mobile apps. Can I restart my SIP after cancelling it? Yes, you can restart your SIP after cancellation.

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