When to Exit a Mutual Fund ?..

When to Exit a Mutual Fund ?..

When to Exit a Mutual Fund that  We have Recommended to Our Clients Before - My perspective.. By Mr. B. Padmanaban, CFPCM Certified Financial Planner www.fortuneplanners.com The biggest challenge for today's IFA is when to exit the mutual fund? Suppose, if I exit the fund now, if it suddenly  started performing how to face the Investor / client. We can not be all the time right on our decision,  but when we do the home work, we will be more right than wrong for sure. Fund Name Avg Market  Cap Rs. Cr No. of  Stocks AUM in 2013 Rs.Cr AUM in 2016  (Sep) Rs.CR Aum Growth % UTI Midcap 10,438 87 245 3,605 1371% Mirae Asset  Emerging  Bluechip 14,266 64 157 2,253 1335% SBI Magnum  Midcap 7,836 53 185 2,511 1257% HDFC Midcap  Opportunities 12,722 73 2,802 12,470 345% IDFC Premier  Equity 12,730 52  3,448  6,308 83% First and foremost, last 3 to 5 Years performance is very important  than 10 to 20 years, why because the market is always dynamic. Whether the fund manager is able to cope with the  current environment is very important. Secondly, how each year the fund is performing,  is it started deteriorating or / consistent or / highly volatile,  this can be only seen with the last 5 years data for sure. Thirdly, the average market caps of the mutual fund versus  how many stocks in the portfolio also important. Higher the average market caps will definitely give less volatile,  if somebody really looking for less volatile in  the mid-cap space as well. B. Padmanaban, CFP Fourthly, whether the fund is continuously getting  an inflow or not is very important. The fund which is not doing well will not get the client mind-share. If the fund is not added any inflow after 2013 close,  the minimum returns these funds generated is double.  If the fund is generated only 100% means no inflow!!!  Whether we continuously recommending or not the   overall investing community is not interested anymore!!! Finally, year on year (Rolling Returns)  whether this fund is performing with the peer group  or / too much of divergence among the peer,   one needs to really look into. In the current scenario any mid-cap mutual funds  should be in a position to take in flow of up to Rs. 10,000 Crore. If some fund is restricting the inflow, it should  have outperformed compared to the peer group.  All the funds are categorized  by Mid-cap by Value Research online. Look at the expense ratio, the fund which is  most consistent is having the higher  expense ratio which means expense ratio is  the last thing one should look into when they decided the fund.  Unfortunately, everyone is looking for the expense ratio first?? I believe this framework helps you to take a  decision much better whenever we are giving an exit call!!! p.s. This is my personal view and I am not  influencing anyone here. I just wanted to share my thoughts.  B. Padmanaban, CFPCM Certified Financial Planner www.fortuneplanners.com 9884349173 padmanaban@fortuneplanners.com

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