[Music]
hey guys
welcome to another episode with me
shashank udopa and in this episode
you know we're gonna talk about
something slightly different and that is
known as how to exit a mutual fund or
when to exit a mutual fund
now i'll tell you what right a lot of
people when they come out and do videos
they actually tell you when to invest
how to invest and where to invest but no
one tells you when to exit how to exit
and what do you need to plan when you
exit
just like how there's a plan to invest
there is also an equal amount of
planning required when you exit a fund
as well so in this video we're not gonna
talk about how to invest we're gonna
actually talk about how to exit the
mutual fund
and when to exit a mutual fund in more
uh particular right
[Music]
right so now we're gonna do a few
reasons i'm gonna tell you a few reasons
which actually explains
when you need to exit a mutual fund and
if you see these reasons you should exit
at that point
okay awesome so let's look at reason
number one
if your fund is consistently giving you
a poor performance
you need to exit that fund now what do i
mean by consistently giving a poor
performance
now if you have a fund that is
constantly returns are constantly going
downwards it's not going upwards it's
constantly going downwards then it's
obvious that you need to get out of this
fund and find another fund to invest in
now if the fund has gone down in one
month time frame like in the last one
month it went down by two three percent
don't feel scared about it right you
need to give it enough time to perform
the second thing what you need to look
at is how is it compared to the other
funds if all the other funds in the same
sector have given very good returns but
this one
your fund is not given that good returns
then it might be time to consider
moving it to another fund the third
thing or the worst thing that could
actually happen
is if your fund does not outperform the
benchmark index
right if it does not outperform the
index fund then you've got lower than
the index then the fund is really not
doing really well and you need to exit
at that point
there are so many reasons why a fund
could not be performing well
right the fund might have invested in
some kind of a sector or some kind of
companies in a particular sector
and that sector might just have a bad
time right the sector might be going on
a downward spiral and your fund is
actually invested in that and if that
happens it creates an issue for your
fund and indirectly creates an issue for
you now
that is for an equity fund but if it is
a debt fund they might have invested in
low credit rated securities
and might have failed to earn higher
returns as planned or as expected
so when things like that happen you need
to check how is it with respect to the
index fund
and is it giving good returns with
respect to all the other funds in the
market
if it is consistently giving you bad
returns time to exit
that was number one now the second
reason why you would want to invest or
when to invest in the
mutual fund is with respect to
investment objective
now what is investment objective the
main investment objective is
why did i invest in this mutual fund
right when i invest in a mutual fund we
ensure that my investment
objective is in line with the fund right
maybe they're moving in from a
diversified equity fund to
just a pharma concentrated fund now it
might give great returns but the risk
also might be quite high
and that is not in line with my
investment objective maybe i'm investing
this for my retirement and i don't want
so much volatility in life
so when something like this happens it
is best to step away from that fund if
it moves away from your investment
objective
if you are saying okay you know what no
shashank this the risk in this is okay
and maybe they've just merged into
another fund now and the two funds have
the same risk profile
and it is in line with my investment
objective then you'll be like okay fine
that is fine that is okay i can still
stay invested
but if it goes against your investment
objective and it becomes little more
risky
then you should be like okay you know
what i think i should go and find
another fund
that is in my risk profile or that is in
my investment objective
so when the fund changes its objective
according to you
you need to change the fund as well so
that is when you exit the other fund
now the third thing very important is
something known as
portfolio rebalancing now what is
portfolio rebalancing at the beginning
let's say you want to have an equal
allocation of equity and debt
so you invest 50 in an equity fund and
50 in a debt fund
now what happens is you know with the
recent bull run that's going on right
now
obviously the nav of your equity part
would go up more so equity will take up
more than 50
and debt will slightly take up less
obviously because the bull run is going
on
now when that happens you might be like
you know what no
this is not good for me i want an equal
allocation in equity and debt
so i need to rebalance it okay if some
something's gone up 70
and the other one is only at 30 maybe i
need to slowly rebalance it
rebalancing is nothing but you know
removing something and adjusting it
somewhere else
it's not putting it back into your bank
account it is rebalancing the allocation
right because maybe equity went 70 and
dead 30 maybe i don't want that so much
so i make equity 60 and debt 40.
i'm just rebalancing right so that is
when you usually exit a particular fund
when it goes out of proportion with in
line with your investment
objective now another reason that might
be there for you to exit a fund
is the achievement of personal finance
goal right
now what is achievement or personal
finance goal now we all invest for some
reason
right maybe mental peace maybe for some
emergency fund maybe for
an investment objective of okay you know
what i want to buy a house so i'm
investing for this
or maybe it might just be as simple as
you know what i just want a nice amount
of money when i retire
and after my retirement i want good
amount of money in my bank account to
live a peaceful happy life
now that might be it now what happens is
imagine you're investing from day one
and you're accumulating your funds
and now you're almost close to
retirement okay you have reached this
point where you're almost close to
retirement
and now just before retirement you might
see that you know what the market is
very volatile
all my savings that i've done from the
last 20 25 years might just go down
because the market might go into a crash
it is a possibility
right and you don't want to be in this
volatile market because now you want to
enjoy retirement
so at this point there is something very
beautiful there's a very new technique
that has come out quite recently it's
come out
it's known as swp or also known as
systematic withdrawal plan
right withdrawal prime means removing
the funds so instead of just selling
everything right at one go and putting
it into your bank account
what you can do is you can do a
systematic withdrawal plan whereas you
can tell the equity fund
right or you can tell the fund okay put
a standing instruction saying that
you know what transfer some money from
my current equity fund and maybe put it
into a liquid fund
every month take a particular amount or
sell a particular number of units
and put it into a liquid fund which is
more safe for you so that is something
that you can do
so as soon as you are coming close to
achieving your personal finance goals
and you want to remove it you can remove
your money that's when you exit a mutual
fund
but again do it with a plan read up
about systematic withdrawal plan and see
why that is more important than just
removing your money upfront that is a
very important factor
now another reason why you might exit a
mutual fund
is with the change of the fund manager
and this is very important
right so every mutual fund is run by a
fund manager it's success or failure of
a mutual fund depends on the fund
manager itself
now some mutual funds are very
successful only because of the fund
manager
right not because of the fund house but
maybe because the manager who's running
it is very famous
now what happens if suddenly the fund
manager is changed
okay what happens if the fund house
changes the fund manager and he leaves
or what happens if the fund manager
tomorrow decides that you know what i'm
gonna play a little more risky
i'm gonna change my strategy and i'm
going to have a more risky profile
now when that happens and the
performance of the fund might decline
then that is the time you inve
you exit the fund right either when the
fund manager actually gets changed
or if his new approach might not be in
alignment with your new approach so that
is when you say okay i'm done i need to
exit this and maybe invest it back into
something else
another reason right and this is very
important because a lot of you have the
same question
is when do you exit a mutual fund when
it's profit booking time
right now you'll be like okay shashank
profit booking is such a topic that
nobody knows when is the right time
right place and nobody can predict when
the right time right place is for a
profit booking but what you can do is in
an investor's journey right when i'm
investing
there are lot of opportunities for me to
exit right and get
amazing gains in the stock market now
obviously if you invest for a very long
period of time you will make
better returns but then there are some
times there are these weird conditions
in the market there are economic
conditions or market conditions
uh from time to time that will keep
coming that might trigger you to book
the profits and trigger you to be like
okay i need to take my money out
right so let me let me give you an
example now if you look at
india right if you look at the inr okay
sometimes what happens is a weak
rupee if the rupee is weak it is
beneficial for the i.t sector because
they deal in exports so if the rupee is
weak they get more money from dollars
and they make a lot of money but what
happens is when the rupee is weak for a
long time and dollar keeps increasing
right
but then suddenly there is a cycle curve
where the rupee starts becoming stronger
and dollar keeps going down so when
rupees starts becoming stronger
that's when you know that the i.t sector
is not going to do well so i think that
time i should book my profits of
whatever i have in the iit sector
and reallocate them somewhere else that
is when you do profit booking
obviously you can't time the market you
don't know when it's going to go up and
when it's going to go down
but when you see a trend like this you
might see that it is not favorable to a
particular sector
remove it put it somewhere else right
don't obviously put take it out and
enjoy
just reinvest it somewhere else into a
different sector so it is more like your
profit booking
and rebalancing at the same time so that
is when you profit book at
when and exit a mutual fund at that
point now
i've been talking about how to exit
right and i've been talking about when
to exit
but let me tell you when you want to
exit how to do it in a very systematic
and a planned way
so we will look at an exit plan now
there are two three ways you can look at
an exit plan
depending on how you want to exit and
what are your goals of exiting
now the first thing would be that
imagine um you are exiting a mutual fund
because you've reached your financial
goal
okay i've come towards the end of my
financial goal in next two three years
i'm going to retire
and i want to get my money out right now
what you need to do is
before you reach your retirement goal
maybe two years or maybe three years
start making a plan okay i have built a
corpus of say 10 lakhs
now i want to remove this money so maybe
every three months i'm gonna remove a
certain amount of money
and put it back into some other fund or
into some other investment or into a
liquid fund
i don't know what it is but make a plan
don't just say i'm gonna remove all this
money and keep it in my bank account
because you need to grow your money even
after retirement as well right so i'm
not saying use it for your benefit and
enjoy
but make a plan according to it right
now
what another thing that you can do if
you're selling a mutual fund now
the first one was okay i'm reaching my
retirement goals or i'm reaching this
financial goal and i'm making a plan to
systematically exit it out
now another reason why you might be
exiting is if you're selling your
entire mutual fund to book profits right
if you're booking profits you do the
second step
now if you're booking profit you need to
make it very clear that if i'm profit
booking
where does that profit go that is your
planning right now let's assume i made
two lakhs in profit and i want to book
this profit bookmarkle
i'm selling the thing just to get the
gain of 2 lakhs now as soon as you book
this profit
you need to figure out where can i take
this 2 lakhs and reinvest it in the
market
right do i put it back into my other
existing investments i profit book from
the ones that did really well
and maybe reinvested in the other ones
that i might not do well but will do
well later
that is a possibility or you rebalance
your portfolio a little bit
so whenever your profit booking you need
to make a plan as to that profit that
i'm booking
where is it going car how is it going
where is it going and how to use it
efficiently
now the third time okay that was profit
booking now the third time you might
want to invest as i mentioned before
was when you're rebalancing your
portfolio you're selling it to rebalance
your portfolio
now you need to have a rebalancing plan
in place now rebalancing plan again
is very important so you need to make a
plan every time you rebalance
make a plan right where will that extra
money go and how do i rebalance it
depending on a lot of factors depending
on the sector depending on the current
market conditions
and also depending on what interest
rates are going on now
there is another system that you can use
here a new system that was created again
quite recently and this is known as
systematic transfer
plan okay assist stp or systematic
transfer plan
now what systematic transfer plan
basically says imagine i've invested in
an equity fund
and i'm seeing that okay bull run is
slowly getting over and i have a feeling
india might change the interest rates
that might make the bond rates or might
make the debt funds
very attractive so what i'll say that
okay i have say one lakh in my
mutual fund and with the same company
with the same amc right or asset
management company
i'll be like listen in the same asset
management company you have another debt
fund
so do one thing i will issue a
systematic transfer plan
that every month from my one lakh fund
remove 10 000 and start putting it into
your debt fund
same company so they'll do the transfer
for you so you don't have to sell here
and then buy again you just be like
please transfer from your
this fund to the same companies this one
right so equity to debt so you can do a
transfer of that so if you're
rebalancing you can do a rebalancing
from that
anytime you think oh maybe it's you know
something's gone up by 10 15 percent i
want to rebalance
again rebalance from a systematic
transfer plan this is something that a
lot of people do that is something that
you can do as well when it comes to
exit planning now as i told you very few
people in the market
actually talk about when to exit a
mutual fund and moreover than when to
exit
how to exit with a plan we all make a
plan to invest in the market but when it
comes to exiting everyone's
scared everyone doesn't understand when
to exit they might be like
you know what is the market going to
crash should we exit right now but it's
not only those factors there are so many
different factors that we mentioned
right
market conditions might be changing
interest rates might be changing
the sector might be not attractive
anymore even the dollar rate inr dollar
rate might affect some sectors as well
so in this episode i hope we learned all
the different things of
when to exit a mutual fund and then how
to plan
once you exit a beautiful exit plan was
also discussed in this
again if you like this and this is
something little different that we did
uh not many people do this so if you
really like this episode please like
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and if you like this thank you i really
appreciate it i'll keep coming and doing
more episodes for you guys so this is
shishan gurupa signing off
hey guys just a disclaimer any stocks or
fund that have been mentioned in this
video is only for educational purposes
we do not recommend a buy or sell in
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subject to market risks read all the
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please read the risk disclosure
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