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Mutual Fund Switch Decision
Category: Mutual Fund, Posted on: 17/02/2025 , Posted By: Bhavika Chandnani
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Mutual Fund Switch Decision

Even long-term investments require portfolio rebalancing, and sometimes you may need to switch or change your mutual fund scheme.

If your mutual fund scheme consistently underperforms its benchmark and peer schemes, it may be time to consider switching. Here’s how to evaluate whether a switch is necessary:


1.⁠ ⁠Compare Performance with the Benchmark
• If the fund consistently lags behind its benchmark over different time frames (1 year, 3 years, 5 years), it may indicate poor management.
• Occasional underperformance is normal, but if it persists over an extended period, switching should be considered.


2.⁠ ⁠Compare with Peer Schemes
• Assess how similar funds in the same category (e.g., large-cap, mid-cap, hybrid) are performing.
• If your fund consistently underperforms its peers, it may be a sign of inefficiency.


3.⁠ ⁠Evaluate Expense Ratio and Fund Management
• A rising expense ratio can reduce your returns.
• Frequent changes in the fund management team or investment strategy may indicate instability.


4.⁠ ⁠Consider Market Conditions and Fund Category
• Certain fund categories perform better in specific market cycles.
• If the entire category is underperforming (e.g., small-cap funds during a downturn), the issue may not be specific to your fund.


5.⁠ ⁠Align with Your Investment Goals
• If your investment goals or risk appetite have changed, you may need to rebalance your portfolio rather than switch solely based on performance.


Action Plan
• Monitor Performance: Review your fund quarterly or semi-annually.
• Set a Threshold: If the fund underperforms by 2-3% or more over 2-3 years, consider switching.
• Check Exit Load and Tax Implications: Switching funds may involve exit loads and capital gains tax.


Would you like assistance in analyzing a specific mutual fund?


Contact for more info : 
Phone :+91-8600002040
Email : info@digiasset.in


HAPPY INVESTING 

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