When it comes to investment, it is always a good time to start provided that you have a set goal with a long-term outlook to invest. Investment in the stock market is always considered to stay invested for a longer period & make huge gains from the invested fund.
A regular mutual fund SIP investor who has been investing since January 2010, when SENSEX was nearly about 17000 & Nifty at the same time was around 5300 in January, Since from then market has witnessed many ups & downs but still managed to reach new highs, Even the previous year of pandemic affected the Stock market in a broader manner where both Nifty & SENSEX collapsed from the fresh high made on 20th January 2020, Later on, it has been considered as an opportunity for every to create a long term investment portfolio.
Many often we forgot the reason why we’re investing. In the above paragraph, the investors who are confident in equity investments would have earned huge when the SENSEX raced up to 41,000 in January 2020. But the person would only enjoy the returns when he booked profit on correct time.
After reaching the highs there was a big fall in the equities market due to the pandemic of Covid-19 which trashed many investors & traders out of the market in just a few days. In this situation, everyone starts feeling panic and started selling hugely, but an investor with long-term vision can never do so and to avoid such unpleasant situations, every investor should work on an exit strategy too while investing in equity markets as well as from mutual funds.
An Exit Plan
Many often we used to be very impulsive with our investments and remain invested and watched our investments growing even when the markets are on high, we stop investing and plan to exit. It becomes confusing to know when to exit. An exit should be structured in a way that helps us to reach our financial goals.
Have a look at 3 major scenarios which suggest we should exit our investments.
- Achievement of financial goals:
As a long-term investor, you should always be looking forward to a constant return of 10-20% from mutual fund investments. But that’s not true as the market reacts to every situation which is known and unknown, A smart investor will always be ready to understand the situation and divert his portfolio accordingly.
Once you are near to your desire goal it is better to shift your investment into safer funds, as soon as we attain our retirement it is better to avoid risky investments.
Every investor while starting its investment journey always looking forward to profitable exits only. Though it is not possible that every time you exit out in profit, The nature of the market is highly volatile which offers a swing from top to bottom and bottom to top. It is far better to ascertain a certain amount of fund or planned return which is desired can be book from investment. The market always gives opportunities to exit but it’s only the greed in the mind of an investor which leads it to losses.
The profits that you earned should be reinvested towards other financial goals and would be used properly. Profit booking can also be used to re-balance the portfolio, and the booked profits would go back to the original asset.
Re-balancing of Assets
Asset allocation is most important in successful investment. An investor should always allocate the sum according to its financial goal and should adjust them according to the need of the situation. This always varies from investor to investor prospect and goal outlook, Those who are more aggressive will focus more on equities and less on debt Vice versa in the case of a moderate and low-risk capacity investor.
One should always keep in mind that the performance of both the asset class is always considered together while someone is planning to book profits accordingly.