Switching from one fund to other

[hemcreddy]

Hi,

What is the strategy one needs to follow when switching from one fund to other?

I've been investing in fund A through SIP for the last five years. Now I want to switch to fund B. Should I go for lump sum withdrawal or do a systematic transfer (STP)? I heard the lump sum withdrawal and lump sum investments are not suggested in mutual funds.

If I go for STP it would take five years for me to completely switch from fund A to fund B. By the time I finish the STP the fund A may start doing better and fund B may start doing worse.

Could you help with an ideal strategy?

Thanks,
Hem

 

[AW10]

Nobody can stop you from selling all your holdings in a MF and using that money for whatever purpose u want. If you decide that fund B is going to be better place then fund A, then go ahead and sell fund A and put that money in fund B.

I guess, as market has fallen in last 1.5 yr. your investment in fund A might not be in profit. So if you don't see Fund B really good compared to A, in my view, it is no harm in leaving your money with fund A.

Whatever is the case, listen to other but take your own decision.

 

[hemcreddy]

Thanks for the reply. but my Q is more about should I go ahead with lump sum withdrawal from fund A and invest in fund B or do a systematic transfer?

--Hem

 

[AW10]

If I have to take decision in this situation then I will exit Fund A in one lot, keep funds in bank and gradually enter in Fund B in few steps. It doesn't have to be monthly SIP or systematic transfer. It can be in few big lots (say 3 or 4). I don't see the reason of holding something which I feel is inferior and not holding something that is superior.
Check out, if you are getting emotionally involved with your fund. Better to keep emotions out from the investment and be ruthless in implementing your decisions. (I have learned it hard way)

My Reasons - Market has run up a lot in short time so booking profit (either partial or fully) is advised after such extreme action. As lot of buying has already happened so smart money will not buy after buying. Hence there are high chances that we will see correction. In that case it is better to wait for new purchase. Uncertainty is around the corner due to budget and then quarterly results in next few days. That will cretainly offer better buying opportunity.

That are my views.. you don't have to agree with them.. hence take your own decision.

Happy Investing.

 

[hemcreddy]

Thank you very much for your suggestion.