When should one exit a mutual fund scheme?

How to decide when to exit a mutual fund? What are the parameters to consider before deciding to switch from one fund to another fund?
--Devansh Thapar

Ideally, you should exit your mutual fund scheme when you achieve your goal. If you are investing in an equity scheme, you should take the money out of it a couple of years before the goal. This is to ensure that the money is transferred to a safer avenue like a bank deposit or liquid scheme to protect it from the volatility associated with the stock market.

You should also consider exiting the scheme if it is underperforming both its benchmark and category for more than a year. Just find out the reason for its underperformance, and if you are not convinced with the reasons given by the fund manager, you may exit the scheme. Transfer the procedure to a better performing scheme in the same category.


You may also exit a scheme if the scheme changes its key features midway. If the changes are clashing with your investment objective or risk profile, you should sell your investments in it and shift the money to a scheme that matches your investment objective and risk profile.