When should you sell your mutual fund investments? Experts weigh in.
Subscribe to enjoy similar stories. When planning your finances, there's always plenty of advice on how and when to invest in mutual funds. However, an equally important question is all but ignored — when should you sell your mutual fund investments? Knowing when and why to sell a mutual fund is just as important as knowing which fund to invest in, and requires a mix of strategy, timing and foresight.
Mint spoke to financial experts to help answer this critical question. One of the most straightforward reasons to sell your mutual fund investments is that you have achieved your financial goal. Vishal Dhawan, a Sebi-registered investment advisor and founder & CEO of Plan Ahead Wealth Advisors, said it’s prudent to sell your mutual fund investments once your financial objective has been met.
Some investors take a goal-based approach to financial planning, in which they sell their mutual funds and shift the money to safer instruments at least two to three years before a significant financial goal is due. "This strategy protects the investor's gains in case of the equity market crashes just before the goal is achieved," said Abhishek Kumar, a Sebi-registered investment advisor and founder & chief investment advisor at Sahaj Money. Vishal Dhawan said investors can also sell their mutual funds for specific tax strategies such as tax gain and loss harvesting.
If you’re nearing the ₹1.25 lakh annual tax-free gains limit on equity mutual funds, selling to realise those gains can be a smart move. Similarly, selling a fund at a loss can help offset gains from other investments and reduce your tax bill. Also read | SME IPOs: The new gold rush or fool's gold? For some investors with global exposure, US tax rules pose unique
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