1. Instead of being influenced by negative returns of a fund alone, its comparison has to be meticulously done with an appropriate benchmark index and industry peers.
2. If its parameters and ratings have gone down continuously over all quarters of a year, as compared to its peer schemes, it would be better to redeem it, or replace it with a better peer fund, within your overall asset allocation and risk profile.
3. Exit a non-performing fund bought only for appreciation without any backup facts.
4. If a fund was included in one's portfolio with the sole purpose of benefitting from a particular market situation, it should be monitored more closely, and exited if the expected situation did not materialize or when the objective was achieved.
5. Also exit a fund that is inconsistent in its declared objectives, benchmark and asset allocation, making it inappropriate for you.
6. Sensible investing means releasing capital from a loss-making investment and putting it to an alternative use, so getting rid of a bad fund, by systematic redemption and reinvestment in a tax-efficient manner, instead of ruining your existing portfolio makes sense.
7. Warren Buffet's popular quote in this regard is:- “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted in patching leaks."
8. Usually, lumpsum redemption of a non-performing or irrelevant fund, works well when:-
a) You are in urgent need of money,
b) CG taxes are insignificant,
c) You estimate a steep northward movement in another fund, or
d) Your current fund is a nightmare.
9. In other cases, STP / SWP (with simultaneous SIP) works better as:-
a) You can avail CG tax benefits,
b) There's chance of salvaging loss,
c) New fund gets cost-averaged, and
d) Peak level buying is avoided.
10. We shouldn't assume that waiting will always give us an honourable exit, and a rotten apple should be got rid of to protect the overall portfolio.
2. If its parameters and ratings have gone down continuously over all quarters of a year, as compared to its peer schemes, it would be better to redeem it, or replace it with a better peer fund, within your overall asset allocation and risk profile.
3. Exit a non-performing fund bought only for appreciation without any backup facts.
4. If a fund was included in one's portfolio with the sole purpose of benefitting from a particular market situation, it should be monitored more closely, and exited if the expected situation did not materialize or when the objective was achieved.
5. Also exit a fund that is inconsistent in its declared objectives, benchmark and asset allocation, making it inappropriate for you.
6. Sensible investing means releasing capital from a loss-making investment and putting it to an alternative use, so getting rid of a bad fund, by systematic redemption and reinvestment in a tax-efficient manner, instead of ruining your existing portfolio makes sense.
7. Warren Buffet's popular quote in this regard is:- “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted in patching leaks."
8. Usually, lumpsum redemption of a non-performing or irrelevant fund, works well when:-
a) You are in urgent need of money,
b) CG taxes are insignificant,
c) You estimate a steep northward movement in another fund, or
d) Your current fund is a nightmare.
9. In other cases, STP / SWP (with simultaneous SIP) works better as:-
a) You can avail CG tax benefits,
b) There's chance of salvaging loss,
c) New fund gets cost-averaged, and
d) Peak level buying is avoided.
10. We shouldn't assume that waiting will always give us an honourable exit, and a rotten apple should be got rid of to protect the overall portfolio.