When to Sell a Fund

I want advice on redistributing my loss-making investments and enhancing my portfolio. -AK Ganguli

This is a question that is being asked by many investors. While it is important for you to evaluate your investments, you shouldn’t get carried away by the losses. You should look at the fund’s performance relative to its peers and category. The equity markets have not done well over the past 1-2 years, and your Rs 100 going down to Rs 90 doesn’t necessarily mean that you should sell your fund. Consider selling a fund only when it fares badly over a long period of time. Try to understand why the fund has not done well. A fund which has done consistently over a long period of time shouldn’t be sold because of one patch of underperformance. Poor performance should prompt you to review your investments, and you should sell a fund only if its underperformance sustains.

This article was originally published on May 08, 2012.