When should one exit a fund? Should one exit in lump sum or through STP?
Anant Kumar, Bangalore
It is a good point that you have raised about exiting your investment in a fund. You should consider exiting your investments in a fund in case of a few instances – if it has achieved its goal, you should stop and exit the investments or in case if the fund is consistently faring poorly compared to its benchmark and peers. There is one more instance when you should exit your investments in a mutual fund – when you are in urgent need of money, in which case the exit is necessitated. Your exit from a fund could be total or partial. Total exit is at times viewed as a cut your losses phenomenon. Another popular way is to gradually exit from the fund using systematic transfers to better performing funds. This strategy only delays the process of cutting losses in the hope that the fund will turn around. However, it is an opportunity loss to remain invested in a poor performing fund hoping for a turnaround or exit in phases from it.
