Exit six months before your goal, not on the final day
According to Parashar, investors should begin exiting mutual funds six months to one year before their financial goal.
“Markets can surprise you at the last moment. Don’t wait for the exact date — start booking profits gradually before your goal approaches,” he advised.
This strategy, he said, protects investors from sudden market volatility that could erode years of returns.
Follow asset allocation, not emotions
Parashar stressed that strategic asset allocation is the key to consistent returns.
“Greed sets in when markets rise. Stick to your risk profile and rebalance — equity, debt, and gold — as per your age and goals,” he explained.For instance, a 50-year-old investor with ₹10 lakh might allocate 50% to equity, 40% to debt, and 10% to gold. Rebalancing ensures profits are booked from outperforming assets and reinvested in underperforming ones.
Don’t exit in one go; book profits gradually
Parashar warned against exiting mutual funds entirely or at once.
“Never withdraw everything in one shot. Partial redemptions in a staggered manner work best,” he said.
Investors can redeem 20%–25% of their profits at a time, allowing the remaining corpus to grow.
Don’t let market swings drive your exit decision
Many investors panic during volatile markets. Parashar cautioned that profit booking should never depend on short-term fluctuations.
“Rebalance when equity allocation grows 15–20% beyond your set ratio, not because of a two-day rally or fall,” he said.
He added that reviewing portfolios annually is essential, especially when funds consistently underperform peers or benchmarks.
Rebalance once a year; review performance regularly
Parashar recommended rebalancing portfolios annually or whenever market conditions shift significantly.
“Rebalancing is within asset classes — review is about fund performance. Both are critical,” he explained.
SIP vs lump sum: Exit strategy differs
For SIP investors, Parashar suggested holding for at least one year to avoid exit loads and to let compounding work.
“For lump sum investors, stagger redemptions. For SIPs, wait for a full year cycle before withdrawing,” he advised.
He concluded that the right exit strategy depends on time horizon, risk profile, and discipline — not on emotions or short-term returns.
Key takeaways
- Start exiting 6–12 months before your goal.
- Follow asset allocation to manage risk.
- Rebalance annually and book profits gradually.
- Don’t exit based on market noise or fear.
- SIP investors should hold for at least one year before withdrawal.