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I have 65 units of Reliance Growth Fund with an average purchase value of Rs 140.
Now, as the Net Asset Value has increased to Rs 221, is it prudent to come out of it and reinvest this in Fidelity?
- Santosh Udyavara
It appears that you want to sell your units of Reliance Growth simply because it is currently fetching a much higher price than what you paid for it.
This is a wrong premise to sell the fund. Investing in a mutual fund is significantly different from investing directly in stocks. If the stock prices has risen substantially and you feel it is overvalued, you may have valid concerns and want to sell your stock.
But this is not so for a mutual fund. The current NAV should never be the decision-making criteria. On the contrary, if a fund in an investor's portfolio is doing great, he might be tempted to increase its holding and invest a little more in it!
When you invest in a mutual fund, you do not have to work hard in rotating your money from one scheme to another. All you need to do is identify a few good funds and keep investing in them regularly.
When should you sell?
1. When you need the money.
2. Your fund has started to under-perform and turned into a laggard.
3. You want to alter the overall complexion of your portfolio. For instance, you may want to reduce the proportion of mid-caps in your portfolio and therefore have decided to sell your units in a mid-cap fund and buy units of a large-cap fund.
In your case, if the reason is that you are worried about the fact that a lot of your investment is in mid-caps because of Reliance Growth, then it might be a plausible reason to considering exiting it, otherwise you can stay invested.
To see the other queries answered by our mutual fund expert, read Who calculates a mutual fund's NAV?
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