Holding Dilemma:
Mutual Funds Investors normally invest in 4-5 different funds. Probably out of these 4-5 funds, 1-2 may not perform well. Over a period of time, they may come across such thoughts that there is a need to get rid of these non-performing funds. The question remains what is the right time to move out from such funds and select some good ones as already few non-performing funds are down by a certain percentage. Does it make any sense to book such losses? There is a need to study this situation in depth.
We need to analyze whether a particular non-performing fund is a good fund or not. It is imperative to judge the current and past performance of the fund, and of course, a comparison with its peers in different market situations makes a difference. Consistency is another key factor to analyze a fund. If a fund has given a consistent performance in the past and at present, its down in parity with the market downfalls, we need to retain it. Possibly the present non-performance of a fund might be due to the prevailing market conditions.
In case that fund is a habitual non-performer, we need to redeem such funds. Can an employer continue with a regular late comer or a non-performer? Be it any company, any employer, the answer would be the same in any situation. On a contrary, it will be an imprudent decision on that employer's behalf, to fire a performing employee, by just checking the attendance sheet for a weekly/fortnightly period. We need to take a rational view about our investments. One can dispose off the non-performing funds any time.
A bad fund may turn out to be even worse with time, one need to get rid of it sooner or late. Immediately with the diagnosis, it is always better to start treatment. There is no need to wait, its time for some action. The same way, start investing anytime in healthy funds and vice versa get out of such unprofitable funds any time, just a decision is required.
