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Redeeming Over Time

If a fund starts performing badly, you should redeem your investments over time & not in one go…

I am a long-term investor investing through SIPs in five funds for next 15 to 30 years. I I dump a fund for its continuous underperformance then what should I do with the existing units in that fund? Should I hold, sell, start SWP? What should I do with the cash once I sell out?
- Mrityunjoy Chowdhury

It is encouraging noting your inclination to invest for the long term and sensing the reality of varying fund performance over such long periods. While it is prudent to stop investing in a fund that starts to fare badly; you should consider redeeming your investments over time and not in one go. By initiating a systematic withdrawal you will be committing to a time bound withdrawal which may not be good, especially if the fund continues to perform poorly. The call to exit in lump sum or as and intermittently over a period of time will depend on how badly the fund performs and your own risk taking ability to hold on to a poor performer. As for the redeemed sums, you can invest it in to your existing good performing funds or start investing a good fund in the same category of funds from which you are exiting.

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