Observe performance of the fund for a while before you say, “I Quit”
It is proven by facts that the right timing
of entry and exit from the stock market or a mutual fund is a difficult call. The decision purely depends on the investor’s choice, driven by his investment objectives, his perception of the market and other relevant factors. However, common sense tells us that a good time to enter a market is when the market looks attractive and valuations of stocks seem relatively cheap. Similarly, exit when it is on a high. But for a happy exit, the following points should be kept in mind:
Under performance: One should study the performance of this fund against the benchmark and the peer group. If the fund is outperforming the benchmark and peers then one may remain invested in the fund till the time his objective is met. Selection of peers should be done carefully. One should never compare a debt-based fund with an equity-oriented fund or a sectoral fund with a diversified fund. Though every mutual fund publishes its data on regular intervals, it is not prudent to sell a fund because of its short term performance only. As a prudent investor one should observe performance of his fund for a while before he decides to exit.
Change in fund’s objectives: A fund says a lot about investor’s risk profiles and its own plans on investment. What it says and how it complies with them has to be seen. Any material change in the investment objective of the fund is an exit point worth considering. For instance, a fund whose primary objective is to invest in a diversified portfolio may start investing only in a particular sector. The investor needs to be cautious because it’s alarming if such changes are too often.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
It is proven by facts that the right timing
of entry and exit from the stock market or a mutual fund is a difficult call. The decision purely depends on the investor’s choice, driven by his investment objectives, his perception of the market and other relevant factors. However, common sense tells us that a good time to enter a market is when the market looks attractive and valuations of stocks seem relatively cheap. Similarly, exit when it is on a high. But for a happy exit, the following points should be kept in mind:Under performance: One should study the performance of this fund against the benchmark and the peer group. If the fund is outperforming the benchmark and peers then one may remain invested in the fund till the time his objective is met. Selection of peers should be done carefully. One should never compare a debt-based fund with an equity-oriented fund or a sectoral fund with a diversified fund. Though every mutual fund publishes its data on regular intervals, it is not prudent to sell a fund because of its short term performance only. As a prudent investor one should observe performance of his fund for a while before he decides to exit.
Change in fund’s objectives: A fund says a lot about investor’s risk profiles and its own plans on investment. What it says and how it complies with them has to be seen. Any material change in the investment objective of the fund is an exit point worth considering. For instance, a fund whose primary objective is to invest in a diversified portfolio may start investing only in a particular sector. The investor needs to be cautious because it’s alarming if such changes are too often.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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