Top mutual funds? (..and Exit Strategies)

There are no top performing mutual funds. All you do is, head over to http://moneycontrol.com, look at the best mutual funds with 3-10 year consistent performance, pick any two (or three) and start investing.

So what would ensure that your funds remain profitable? The exit strategy. Once you have loyally invested  2-3 funds, you establish a timeline, generally one year, to review performance. You execute your plans according to this timeline. These are generally my bullet-points:

  1. if a fund gives a loss of more than 25%, I take the loss and switch
  2. if a fund stays stable at a profit of at least 20% for the last 5 years, I switch to the top performing fund at that time and book my 20% profit
  3. if a fund gives me excess profit of 30%,  I book profit and stay put at this fund

The yearly review is because I do not want to spend too much time on investments, but may be you could do it in a semi-annual or quarterly cycle (anything less means you are obsessed with money). Your timelines also change. Here is a general directive I would follow for timelines when my review cycle is 1 year:

  1. less than 30 years of age: 8 years
  2. more than 30, less than 60 years: 5 years
  3. more than 60: 3 years

If discipline is maintained, your money should keep you happy (and don’t expect to buy a Rolls Royce at age 75 – those retirement benefit ads are generally misleading about the billionaire funda).

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