The key points to keep in your mind while redeeming your mutual fund investments, so that you can get the optimal returns is as below:
Goal-based redemption – If your mutual fund investment is for a specific purpose, like buying a house, paying for education, or retiring, you should think about selling the funds when you reach that goal.
Consistent underperformance – When a mutual fund consistently underperforms its benchmark or similar funds, it may be wise to sell and invest in a better-performing alternative.
Portfolio imbalance – As some investments outperform others, your portfolio might shift away from its initial balance. In such a case, selling some mutual funds can help restore your portfolio balance.
Changing risk tolerance – As you near your retirement, you might consider selling mutual funds and reinvesting in lower-risk options, such as bonds or money market funds or even in bank fixed deposits, to protect your wealth.
Emergency situations – Unforeseen circumstances, such as job loss, medical expenses, etc., may necessitate redeeming mutual funds earlier than planned. In such cases, financial necessity takes precedence over market conditions or tax implications.
