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What's the best way to redeem my long-term equity funds?

Dhirendra Kumar explains how should one redeem his equity investments and also says how to deal with a portfolio of too many funds

Can you tell me about when to sell a fund or how to redeem your mutual fund investment? Also, my portfolio is over-diversified. I have accumulated more than 10 to 15 funds in my portfolio. I am not able to assess what returns am I getting on which fund. What should I do?
-Naveen

Both of your questions need elaborate answers. Broadly, when a fund does very poorly over a period of time, you should sell. To define this, check the relative performance. If market goes down by 15 per cent, and your fund goes down by 10 per cent your fund has done well. But your experience will be of disappointment because your fund has gone down. So, look at the performance relative to the market. Just check whether the fund has fallen more than the market and how is it doing relatively to other funds of the same kind.

But the primary reason, that rests with you, must be that you should disinvest methodically. You should invest methodically and also withdraw methodically. Assuming that you are investing for a ten year horizon and your son is getting close to college. don't wait for the last day. Start withdrawing money, that you need in the first year, from the ninth year. You should start withdrawing methodically one or one and half year before. And only withdraw that much of money which is required. This way you will not be dependant or held hostage to the state of the market for realising the gain. Basically you are averaging your investment and averaging your disinvestment too. Opt for a Systematic Withdrawal Plan (SWP) and don't be greedy. Don't try to time the market. Be very methodical with it for your non-negotiable goals.

On the next question of how to clean up your portfolio, I would say, just keep 4 to 5 best funds and stick to them. And this is the best time to do it as there won't be much capital gains post February 1, 2018. And if all your investments have completed one year, there won't be any exit load. Of these 15 funds, just choose 4 to 5 good multicap funds. These four funds should be adequately diverse. Also, resist the idea of adding new funds in future.

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