Are you scared of investing in mutual funds? There are times when even the more experienced investors are confused about their investments. For several investors, afterthoughts creep in, especially when the investment decision is made so quickly.

Also, there are situations one blames on their not deciding to exit an investment just after the stock markets witness a steep fall. There are many ups and falls in one’s investment journey, there are bonds when we need to worry and sometimes even consider leaving the fund scheme.

Let look at some of the situations when we doubt and need solutions for the same.

The change of fund manager:

The Indian Mutual fund industry is still in search of good fund managers, but some are still in top positions. Investors, who have invested by the advice of fund manager instead of the fund attributes are likely to be in trouble when a fund manager exists the AMC.

Those investors think to exist the investment in the fund scheme managed with the exit of the fund manager.

What to do?

The AMCs run their mutual fund following rules and principles that mitigate any change in the way the scheme invests in case of a change in the fund management.

Therefore, fund management is the team task, you need to continue observing the scheme performance before taking any decision.

Check scheme underperformance

The performance of the mutual fund schemes changes every passing day. There are times when the scheme in which you have invested gives you lower returns and then some of the other which could be the reason for worry.

What to do?

The mutual fund schemes underperformance could the reason for many factors There are times when a scheme returns take a hit, owing to economic changes or due to specific bets not working out. You need to find out the reasons for the dip in the performance, and if it is consistently lower than the benchmark and peers for more than 3-4 quarters, in this situation you could consider existing to a better performing scheme.

The Economic and Political Condition

Your investment value is dipped to 30 percent and the stock market is going in loss. You are worried about the investment will go down as the capital amount you have invested and consider existing as a good option.

What to do?

There are many situations that are unpredictable and not only change the landscape of the financial market but also of the economy. For example, the recent Covid-19 case is unprecedented and impacts all segments of the economy. Therefore, figure out the causes behind the performance loss of the Mutual fund scheme you have invested in, there are good possibilities of your investments, not just regaining but also getting higher returns when things turn around.

Change in financial status

There could be a situation in your life, where you think before investments, you may have need of money for urgent bases for some work and don’t have the option to invest in a fund scheme and you consider an exit.

What to do?

If you have a cash flow issue, you could opt for other options like consider the SIP pause feature. Similarly, on the other hand, if you have more money to invest, instead of exiting the current investment fund scheme, you can increase your investments in the same.

Change in fund’s fundamental Attributes

The change of fund scheme you have invested or the merging of the fund scheme due to change objective could also cause doubts about investing in such a scheme.

What to do?

This problem is solved since the 2017 SEBI circular on categorization and rationalization of Mutal Fund Schemes. To abide by this new rule, several mutual fund schemes were merged and the objective of many investments was changed to fail in line with the new regulation. These came into action by mid-2018. If you did not act then, you might just view your investments before making any move.

Changes in Tax Law

The rule of long-term capital profit of 10% on gains from equity mutual fund investments of over Rs 1 lakh in a financial year in 2016, did change the way of investment in equity mutual funds. Also, the introduction of dividends being taxed in the hands of the taxpayer in budget 2020, will make you change the investment strategies you were following.

What to do?

Consider if your investments are in the dividend option, you could consider moving to the growth option for tax efficiency. Instead of the dividend income, you could structure an SWP to create an income stream from your investment in the growth option of the equity scheme.

 The change of exit load

Consider that there is an increase in the exit load of the mutual fund scheme in which you have invested.

What to do?

Investment in mutual funds comes with exit load, which is stated in the time of investing but could change later on. Mostly the exit load is based on hurdle rates, which taper down over time, you could stay invested till the next load is nil.

The sale and/or AMC Merger

The merging of the AMC in which you have invested or sold out to other AMC.

What to do?

There are many reasons for the merging of AMC, you must evaluate the performance of the new merged scheme before reacting to the existing investment. It is rare that the objective of the merged scheme would be different from the one you had initially invested in. If the performance of the merged scheme continues to be good, you can still stay with your investment.

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