Mutual Funds – How to Sell Mutual Funds

 Mutual funds can make an excellent addition to your investment portfolio. However, if the mutual fund is yielding less returns than what you anticipated, you might get tempted to sell off your mutual fund units and invest the funds in other better yielding investment avenues.

If you decide to make an exit from your mutual fund investment, you may do so by redeeming the units you hold. Selling mutual funds is known as mutual fund redemption. However, when you decide to sell mutual funds, you must access all the pros and cons and get a good understanding of when to sell mutual funds and how to sell mutual funds. Besides, mutual fund selling techniques play a crucial role in selling mutual funds.

 

This article helps you in understanding various aspects of how to sell mutual funds and its related concepts. There are four steps for selling mutual funds, let us learn the steps in detail.

 

How to Sell Mutual Funds

 

• Contact the Mutual Fund Company or Financial Advisor

If you have purchased the mutual funds from the mutual fund company directly, you must contact them directly. On the other hand, if the purchase is made with the assistance of a financial advisor, you can contact the advisor or his company.

 

• Check the Fees or Charges of Selling Mutual Funds

Before selling your mutual fund units, check the fees or charges that are applicable. The charges on selling mutual funds depend on the period of your holding, the company with whom you are dealing and the size of the sale. For example, if the purchase of mutual fund units is made with a deferred sales charge, you will have to pay a sales charge on it. The companies selling the mutual fund units with deferred sales charges often allow the holders to sell up to 10% of units without any charge.

 

• Decide the Number of Units to Sell

For selling the specific number of units of mutual funds, you have to submit a signed form to the respective authority. The confirmation letter signed by you ensures that no one else can sell more or less number of units than specified. The selling price of the mutual fund units is NAV of your fund.

 

• Instruct About the Money Received on Selling Units

When you sell your mutual fund units through the company or advisor, you can give them instructions regarding what to do with the money. You can ask for a cheque or instruct them to deposit the money into your bank account. You can even use the money to purchase other mutual fund units or investment.

 

The above mentioned is the process of selling a mutual fund. Along with how to sell mutual funds, you must know when to sell mutual funds. In this section of the article, you will learn about the right time to sell a mutual fund.

 

When to Sell Mutual Funds

 

• Change in Fund Manager

The expertise and experience of the fund manager is the first and foremost thing to consider before investing in any mutual fund. Fund managers help in generating wealth. But when a mutual fund company changes its fund manager for any reason, it’s the time to get cautious. It becomes important to check the expertise and knowledge of the new fund manager. If he does not fulfil your criteria, it is probably the time to sell your mutual fund units.

 

• Change in Strategy

You invest in any mutual fund after determining your financial goals. When mutual fund’s strategy meets your financial goals, you feel more confident and comfortable about your investments. But when the mutual fund company starts changing its investment strategy and that is against your approach, you may think of exiting such mutual fund.

 

• Underperformance

When the mutual fund is not giving the returns you expect out of it even after holding it for the long term, it is probably the time to exit. The best way to know the performance of your fund is by comparing it with other similar funds. If your fund is underperforming, it is not a good sign.

 

• Rebalancing

If you have a set asset model and you rebalance it at the end of each year, you may need to sell your mutual fund units. You may also think of selling the mutual fund units when your investment goals change and there is a need for rebalancing. Like for example, if you were following a growth strategy and now want to change it to a strategy that provides a steady income, in that case, you may have to sell your mutual fund units to fit in the new strategy.

 

Conclusion

The above mentioned are a few of the situations when you may think of selling a mutual fund. However, selling mutual funds should not be an impulsive decision. It is imperative to think wisely and act smartly. Always remember that initially when you decided to invest in mutual funds, you had a positive outlook and that is why you decided to invest. Hence, make sure that your reason to exit is clear. It is ideal to carefully analyse all the pros and cons of your fund's performance and then decide when to sell mutual funds and how to sell mutual funds. Once you gain confidence in your decision, don’t hold back. If you need any assistance regarding investing in mutual funds or any other asset class, you may seek the expert advice of IndiaNivesh.

 

Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

Ref: https://www.indianivesh.in/kb-blog/how-to-sell-mutual-funds