Dhirendra Kumar highlights instances when one should consider exiting a fund
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When should I exit from a mutual fund scheme?
Primarily, you should exit from a mutual fund mostly for internal reasons, such as you've met your goal or you were saving for a certain goal and now your goal has changed and subsequently, your expected time frame for the money, etc. In such cases, you should definitely exit. Further, internal reasons are non-negotiable and you should make that call on your own.
Having said that, there can be one or two external reasons also. Say, you chose a fund because it was doing consistently well compared to its peers and then, it started underperforming. One should decide how long one would take before giving up on a fund. I think this depends on some parameters. If it has been a relatively new fund, then maybe giving it a year is good enough or if the fund has done exceptionally well over the last 10-20 years and has not done well in the last one year, then don't give up. This is because there could be a situation when a great fund is not doing well, but it can provide you with all kinds of experience. So, don't write off its credible history.
Sometime back, one of the funds wasn't doing well and we gave it up to three to three-and-a-half years. However, many times you may not have the luxury of that much time. So, decide accordingly.
Now there is another factor which might warrant an exit from the fund. When a fund manager leaves, I'm alert. But if I'm ever faced with a situation where credibility or trust issues arise at the fund company level, then I think you don't have to turn back, take your money and never look in that direction again. This is because it's a trust-based business and if there is anything which is not smelling good, something which looks like being done not in the best of your interest, then I think it's time to walk out forever.