The long-term profitability of equity mutual funds is the staple argument, made by many financial experts. However, important questions like what should be the right time to withdraw money from it and the suitable strategy to pull out are not addressed much. It is essential to explore that facet of equity mutual funds before investing in it.
One must always have a specific target in mind while investing in an equity mutual fund. The investor should withdraw only when that target is met. For example: If a person requires a substantial amount of money for his/her daughter’s marriage. He/she starts investing in equity mutual funds with either a SIP or lumpsum amount. The person starts investing when his/her daughter is 15 years old and aims to build around Rs 25 lakh in 10 years.
If that goal is achieved in the seventh or the eighth year, implying that the target is achieved before time. The person should withdraw the fund and deposit it safely in the liquid fund.
In the example mentioned above, if the desired amount of Rs 25 lakh is not generated in 10 years, then that person must have a strategy. For an investment target of 10 years, the person must start saving by the 8th or the 9th year. One must not wait until the last moment and make withdrawals of small amounts at regular intervals.
Many people tend to get influenced by the market momentum. They are driven to earn money overnight, without knowing much about the market dynamics. One should be careful of the market environment.
Jigar Parekh, founder, and CEO of Anchor Edge says, “To withdraw from equity mutual fund, an investor can also look at the ratio of PE, PB, and market cap to GDP. He/she can gain a profit by withdrawing the amount and switching it to a liquid fund. It is important to have an exit strategy to achieve the financial goals.”
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