When should you exit your equity funds? Here’s how to decide

Financial Planners


Goals are very near
Equities are inherently volatile, though the blips in the journey are smoothened in the long term. If your goal is just 1-2 years away, you can’t put the corpus at risk. Start systematic transfers from equity funds to debt schemes 1-2 years before the goal date to avoid getting caught on the wrong foot.Portfolio needs rebalancing
The rally in stock prices must have changed your asset mix. If the exposure to equities has changed significantly, it is time to exit some equity funds to bring the allocation to the desired level. Financial planners recommend rebalancing after a big market move, or once a year, whichever is earlier.

Fund has done poorly
If a fund has performed poorly, it is time to junk it. Before you do this, check the performance of the category and the overall market. Don’t look only at the short term. If the fund has been consistently underperforming its benchmark or peers for the past 3-4 quarters, get rid of it.

You have too many

Some investors have the misconception that putting money in several funds diversifies the risk. This is not true because the funds invest in the same stocks, which only leads to duplication, not diversification. Experts say 5-6 equity funds from different categories will give an investor all the diversification he needs.Fund itself has changed
Funds sometimes take on a new investment mandate or are merged with other schemes. In some cases, a fund manager may also leave. A change at the helm is not a reason to dump a fund, unless the fund relied excessively on the skills of the individual.



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