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What is the best time to redeploy money from an underperforming fund?

Dhirendra Kumar suggests switching only if you have solid reasons to do so, irrespective of market conditions

What is the best time for a long-term investor to redeploy the money from a multicap fund to a better fund? Can mutual funds invest in IPOs such as that of Air India?
- Gaurav

To answer your first question, whenever you invest in any mutual fund and you feel that the reasons that prompted you to invest in that fund have changed or if the fund fails to meet your expectations, then you should make the change. And if you have solid reasons to do so, then you should do it quickly irrespective of how the market is performing. Doing so today should be relatively easier as your liability of capital gains would be very less, considering the present market levels wherein your investments might have very little gains or losses, depending on the price at which you would have made them. However, if you are switching to a better fund and your current fund is doing poorly and not meeting your expectations that you set at the beginning, then you can definitely make the switch.

To answer your second question, mutual funds can invest in IPOs. However, Air India is not exactly coming up with an IPO. Although the government is trying to sell Air India, all its previous attempts to sell the airline were failed. Now again, it is trying to search for a buyer but it is still uncertain at the moment. Nevertheless, many mutual funds do participate in IPOs, for example, they have recently participated in some big and popular IPOs.