By Kailash Kulkarni, CEO, L&T Mutual Fund
<p>It would be prudent to exit a mutual fund investment when your financial goal is met.</p>
By Kailash Kulkarni, CEO, L&T Mutual Fund
Whether your goal is planning for children’s education, chalking out your retirement plan or simply saving for a rainy day, mutual funds are perhaps one of the best instruments that could help you achieve your goal.
While most investors understand the benefits of investing through mutual funds, they often try and time their investments rather than staying invested for the long term.
Typically, under normal circumstances, it would be prudent to exit a mutual fund investment when your financial goal is met. For long-term goals, such as retirement planning, you could start-off with equity for strong initial growth and strategically rebalance your portfolio by including lower risk investments over a period of time. But, there could be a few other instances when you could look at making a premature exit. For instance, if your fund underperforms consistently or if there is a change in the fund’s objective that renders it incompatible with your risk appetite or investment strategy, you could look at withdrawing from the fund. It would also help to reassess your portfolio over regular intervals to keep track of its performance because what is right for you now, may or may not be suitable after a few years.
The underlying recommendation for all investments, however, will always be to avoid exiting without adequate research. Being calm and holding an investment for the long term could help you to not only ride market ups and downs and offset the downside effects of market volatility, but also gain from the power of compounding. Lastly, remember that time, and not timing, is the key to successful investing and creating long-term wealth.