Most of us prefer investing in Mutual funds for the only reason to earn better returns. But why is this aspiration mixed by the greed of earning much more than we should normally get?
Most investors commonly make a mistake of timing the market and are always in action of buying and selling the units when the feel they have better chances of earning more. But a wrong bet can make you lose out on your savings and force you into a debt trap of a personal loan or a credit card loan etc., to finance your needs. Here are a few pointers that you need to concentrate upon:
Firstly, your requirement for money should be when your NEED arises. It brings us to the full circle of why exactly you started investing. Only when you had the funds you considered parking them into MFs and carried a whole lot procedure to arrive at the best option for a MF. Similarly, when you plan to exit, consider your need for that particular investment and not the ups and downs of the market.
Your internal choices and decisions play an important factor and not the external ones. The reason why most financial advisors send out the advice of linking their investments to specific financial goals is only because of this reason. When you invest for a specific financial goal, for example buying a house for Rs 70 lakhs after 7 years, you wait till the investment grows till a level where you can redeem them eventually. The psychological edge of buying and selling the units will not be carried out.
Secondly, assess what type of an investor are you. When you planned on taking the specific fund which you currently hold, is it still satisfying your need for which you still chose the fund in the first place? If you needed a very conservative option, you may have chosen an MIP, or an equity-oriented hybrid fund for a little higher returns or an aggressive multi-cap fund for the highest possible returns regardless of risk, and so on. Analyze if these reasons are still answered with your current fund.
Thirdly, examine the external factor, i.e., the performance of the fund. If your fund is not delivering the promises that it had done previously, then it leaves you no option but to find other alternatives where your fund can be re invested.