Almost everyone suggests investing in mutual funds with a long-term perspective. But no one talks about the right time to exit one's investment from them. So, what is the best time to redeem your investments from there?
- Mukesh
First and foremost, yes we suggest investing with a long-term horizon. But even if you have been investing for long, there will come a time when you will come closer to your goal and need the money - for example, two years' time frame. In such a case, you should methodically unwind.
So, if you have been doing your systematic investment plan (SIP), set up a systematic withdrawal plan (SWP) when you are approaching your goal. Therefore, exiting from a fund has nothing to do with the market scenario. Besides, you should sell your investment when your chosen fund fails to be a good performer based on the factor that you considered while selecting the fund.
Also, at times, circumstances change. Assuming you invested with a ten-year time frame but somehow your circumstances changed in a manner that you would no longer be a long-term investor. In such cases, you are likely to consume this money or need this money in a shorter time frame say three years. And therefore, you will have to start unwinding.
One critical thing is that we keep suggesting averaging your investment. Likewise, you should average your withdrawals so that you can prevent yourself from depending on the market when you need the money. Also, be methodical about withdrawals even if it translates into some opportunity losses.
This article was originally published on October 24, 2019.
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