1. As a thumb rule, while retiring, one should retain only his Balanced and Multicap funds of 3+ star ratings, by shifting other funds into them gradually, and then annually withdraw 4-5% out of this retirement corpus (of 20-25 years annual expenses) for meeting his retired life needs perpetually.
2. Redemption of mid-cap and small-cap funds before long-term investment of 5 years should be done only for compelling reasons like:-
a) Fund is continuously underperforming its peers, with rating downgrades annually,
b) Fund is irrelevant now as your linked goal has been achieved or changed,
c) You're "weeding" it out to rebalance your portfolio within existing corpus, and
d) You're in dire need of money urgently.
3. If so, you can redeem them even in lumpsum, if you can digest current losses and taxes.
4. Otherwise, you can STP from such funds to your target funds (Balanced or Multicap), or SWP from them (with simultaneous SIP in target funds), as this action suits better for:-
a) Availing annual CG tax benefits,
b) Avoiding "timing" the market,
c) Cost averaging the target fund, and
d) Having scope to salvage some of the losses being incurred in existing funds.
2. Redemption of mid-cap and small-cap funds before long-term investment of 5 years should be done only for compelling reasons like:-
a) Fund is continuously underperforming its peers, with rating downgrades annually,
b) Fund is irrelevant now as your linked goal has been achieved or changed,
c) You're "weeding" it out to rebalance your portfolio within existing corpus, and
d) You're in dire need of money urgently.
3. If so, you can redeem them even in lumpsum, if you can digest current losses and taxes.
4. Otherwise, you can STP from such funds to your target funds (Balanced or Multicap), or SWP from them (with simultaneous SIP in target funds), as this action suits better for:-
a) Availing annual CG tax benefits,
b) Avoiding "timing" the market,
c) Cost averaging the target fund, and
d) Having scope to salvage some of the losses being incurred in existing funds.