Markets at all-time high: Is it the right time to redeem your MF investments?
There is no right time for a mutual fund investor to exit the investment but there has to be a reason to redeem it
Mutual fund returns are linked to the markets and in the last few months, markets have performed really well. Since equity markets are inherently volatile and it’s never easy to gauge where the bottom or the top is. “Now with the markets at its, all-time high and fear of market correction few equity mutual fund investors have been seen trying to time the market and book profits,’’ says Gaurang Shah of Geojit Financial Services.
However, according to Association of Mutual Funds in India (AMFI) data, equity mutual funds witnessed a net inflow of over Rs 10,000 crore in May 2021, making it the highest infusion in 14 months. The higher inflows were driven by the market rally on the back of declining Covid-19 cases and robust quarterly earnings.
So, if have you also invested in an equity mutual fund that is giving reasonably high returns and thinking to redeem, here’s some help.
What experts say
“There is no right time for a mutual fund investor to exit the investment but there has to be a reason to redeem it and it should never depend on the market situation as no one can time the market. Hence you should touch your MF investment to exit if there is some real need or to shift to other funds if consistently it is performing low even when everything is right,’’ guides Hemant Rustagi of Wiseinvest Advisors.
“Mutual funds are goal-based investment products for 3 yrs, 5 yrs, 10 yrs, 15 yrs and so on hence as investors it does not make sense to redeem the investment looking the equity market’s low or high. Currently, markets have made a new high and there are consolidation and profit bookings by investors directly into equity markets. Markets may look negative in the first quarter as an effect of the second wave of covid-19 but beyond that markets will improve and in the long run, it’s going to perform well,” says Mr. Shah.
You should invest in mutual funds considering the targets like buying a car or house, retirement, child’s education, etc. This will help you to find which mutual funds should be utilized first as your redemption will not be market dependent but your need dependent. Managing your personal finances is more about personal needs than finances.
When should you redeem?
Urgent need for Money: If you have no other option left but to use your mutual fund investments for medical emergencies or loan repayments. Then you should not look at the market conditions to utilize your money.
Closer to your goals: If you have invested for goals like wedding, buying a car, or for the down payment of your home and you are closer to your goals for 6 months to 2 years then you should shift your equity-based mutual funds to debt funds as they would be more secure even if the market falls.