Is it Time to Redeem your Mutual Funds?

With the stock market rising day after day, people who have invested in mutual funds, including those investors that I have assisted just this late 2011, are already experiencing great profits, probably near 50% of their original investment.

Although very excited and ecstatic about the progress of their investments, they are now starting to fear that the profits may pull back, or even disappear on worst case. So before that happen, they are now considering to redeem their investments to realize and secure their profits.

Still reading? Then you’re probably one of those who are in this situation where fear is slowly overcoming greed.

Going back to the basics

Amidst your fear and confusion, and before you make any decision, ask yourself these three questions:

1. Where will you put your money after redeeming your investments?

Given that you want to secure your profits by redeeming your investments, have you given a thought on where you’ll be putting it next? In the bank? Well, for how long? Remember that interests in the bank doesn’t fair well (not even a pinch of dignity) to inflation rates.

Or you’ll buy yourself a new iPhone? Not unless you have invested to save faster for your iPhone purchase, it could be better to just watch the market pull back some of your profits rather than wasting it on something that won’t contribute to your financial independence.

2. What is your investment plan?

Some seasoned investors do a bit of investment re-balancing to manage the risks in their investment portfolio. What usually happen is that on initial investment plan/strategy, a portfolio is created where risks are managed based on short term and long term needs. There, an acceptable combination of risk categories are established.

In cases where one risk category performs really well, e.g. the stock market, these investors assess again the portfolio and re-balance the risks by unloading part of one or several top performing risk categories and loading other risk categories that were left behind. This is to maintain the acceptable ratio and proportion of each risk category established during the investment planning stage.

If this is your reason why you are redeeming your investments, it would be really great if you share us how you do it :)

3. What are you investing for in the first place?

The principles of life does not differ in the principles of investing.

In one’s career, those who tend to succeed more are those who have set succeeding as their objective, their goal. They know what they want, and make conscious actions towards achieving it.

The same way with investing. Along the way, there are many things that could happen that may be favorable or unfavorable to you, but the way you react should always be in line with your goals or objectives, nothing more, nothing less.

Thus, if you are investing for your retirement or for your child’s education that will occur in 5 years or more, you’ll know that whatever happen, you’ll not be redeeming your investments, except of course, if you are re-balancing your investments.

The problem is, if you are just investing because everyone is investing, you’ll just get persuaded when everybody is redeeming.

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  • edward

    This is a Deja Vu or beginning to be the same in 2008 but honestly I learned my lesson well. I invested a small amount in GSIS in 2006 and observed it until last year. In 2008, 40% of my capital was wiped out but after 5 more years it doubled its value. I read the history of this mutual fund and alike back to the 90’s and the cycle is the same so I just let my money there and never panic. What Warren Buffet advised is to choose from top ten best performer stocks and invest on them, same as mutual fund I think.

    • Nick Raquel

      Thank you for sharing this, Edward.

  • john

    hi Nick!

    diba pag down ang stock market, down din ang equity fund?
    its directly proportional.. right?

    ask ko lang. which is better?

    – buy big shares in Equity fund when the market is down VS. the cost averaging strategy?

    among these, alin ang mas smarter way to get more gains?


    • Nick Raquel

      In most cases, ganun ung nangyayari.. Pero it’s not safe to say na directly proportional un..

      Pag sinabi kasing down ang market, they are referring to the performance of the PSEi, which contains the blue chip companies.. Your equity fund may contain more stocks than just blue chips.

      Makes sense? You may try reading this:

      Regarding to which strategy is better, syempre it’s always best to buy at the lowest price. Un lang, you cannot predict when that will occur eh..

      You may try money cost averaging… then if opportunity presents itself, and if you still have funds, buy again..

      • john

        ok i got it! tnx a lot 😀


    Hi! thank you for being so unselfish in sharing your knowledge about investments/Mutual Funds esp to neophytes in the world of investment, like me, thru this website. I Have initial MF investment with GSIS more than 5 years ago. May I know when is the best time to withdraw my investment? With the current economic situation of our country, what can you say about investing more in Mutual Funds?thanx for the reply..

    • Nick Raquel

      Welcome Editha. My pleasure :)

      Before I answer you question, may I know what’s your answer on the questions posted in the article above? :)