I invest in mutual funds through a Systematic Investment Plan (SIP). My investment horizon is 10 years. If my investment grows after five years, should I book partial profit? Or should I wait till 10 years? There may be recession at that time. Or should I do a Systematic Transfer Plan (STP) from the partial profit I booked?
- Manoj
It is a not a great idea to base your investment strategy based on the prevailing (or likely) market conditions. We recommend goal-based investing. For example, in your case, you may have a goal which you want to achieve after 10 years. You should focus on that instead of worrying about a likely trend in the market after five years. All you have to do is to monitor your investments regularly, say, every six months. If you find the scheme is underperforming its benchmark and peers for more than a year or so, find out the reason behind it. If you are still not satisfied, shift your investments to another fund. Also, shift the money from your equity investments to a safe avenue like bank deposits, liquid funds, etc, at least a year or two before the actual goal. This will help you to keep your money safe from a likely volatile phase in the stock market.
This article was originally published on December 23, 2015.
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