Many investors appear to sell
mutual funds for wrong motives.
From financial planning perspective selling funds is advisable under three
situations:
1. Investor has reached his or her financial goal for which
investment was made.
2. Financial goal is drawing nearer so a different asset
allocation is more suitable. Asset allocation is distribution of investments
amongst various asset classes like equity, debt and cash equivalent. e.g. If an
investor is saving for his children's marriage expenses and his goal is less
than 3 years ahead then asset allocation to equity mutual funds may be
reduced to reduce risk of loss when goal matures.
3. Fund performance is not up to expectations and a
better investment in same class is available.
