From mutual funds, stocks to real estate – no matter what our risk appetite is, all investment advices are focused towards buying. It is true that an investment cycle starts with buying but it is equally important to map the right time to sell. And thats how you make the money.

Following are few rules when it comes to sell your investments:

When you reach your goal

This is the most important exercise in term of personal finance & investments. As per financial advisors, all your investments should be goal driven like retirement, child education, property buying etc.

To understand this rule let’s assume you want to buy a house worth Rs. 50 lakh. Since banks or non-banking finance companies will happily loan you 80% of the cost i.e. 40 lakh, you need to arrange for remaining Rs. 10 lakh as down payment.  To accumulate the sum for down payment you can start a SIP of Rs. 12,000 with a large cap or diversified fund for 45 months i.e 3 years and 9 months. At the end of the tenure, you would have Rs 12 lakh in hand with an average possible returns of 13%. If this investment with a short term goal helps to solve the purpose then after 45 months you can sell your SIP despite the market movements.

For bigger goals like retirement or children’s education, it is always recommended to exit systematically two to three years ahead of the target time and move your equity investments in staggered manner in more safe options. That way you won’t be affected by the markets ups and downs.

When fund is consistently underperforming

It is advisable to make mutual fund investments for a longer term but there are always exceptions to every rule. Investors should regularly monitor their mutual fund holdings (every three to four months). If it is consistently underperforming even in up market, it’s time to take a call to exit and invest the same money in a better performing fund. However, one should not base his or her decision on short-term underperformance of a quarter or two. Exit if the scheme is under-performing for a longer period.

When time is right for you

Often investors have tendency to go with market movements. Like when the markets are going up they start buying or vice-versa. sometime, they tempted to hold the stock for a little longer in view of high profit. The automatic impulse is to sell or exit immediately. As per experts, a person or an investor with herd mentality should never get into the markets.

In fact as per many experts, bear market is the right time to buy while the bull market is the right time to sell. But investors exactly do the opposite. An intelligent and experienced investor will always follow a goal-based investment approach instead of being affected by the markets.

When a company is going through major changes

Suppose you purchased a company stock and it has been giving returns as per your expectations. However after a major policy change you are unable to understand its working or future plans. then instead of taking a bet on it, selling it off would be a good idea.

A popular saying -‘A penny saved is a penny earned’. And if you plan properly the same penny can be doubled in no time. All you need is to understand three important strategies – when to buy, how long to hold and when to sell.