In 2025, many Indian investors are still figuring out whether to hold on or exit underperforming mutual funds. With the increase in the participation of retail and more awareness about mutual funds strategy India, this doubt is more relevant than ever. Let’s figure out Should You Exit Underperforming Mutual Funds in 2025 or what you should consider before making a decision.
What Counts as Underperformance?
Before jumping into the conclusion, make sure to check if your mutual fund is really underperforming or not. Here’s how you can find it out:
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Compare with Benchmark: If your fund falls behind its benchmark like Nifty or Sensex for 4 to 6 quarters regularly, then it’s a warning sign for you.
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Check Category Average: Make sure to compare returns with similar funds and if it’s been performing worse for a long period, then it’s a sign as well.
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Management Changes: If the fund manager has changed, then short-dips in your investment can happen. In that case, don’t rush to exit immediately.
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Market Cycles: Equity funds can underperform during the market ups and downs. During that period, consider the broader market condition.
Explore SEBI Mutual Funds guidelines
When You Should Stay Invested in Mutual Fund
Exiting every time whenever a fund dip is not really a wise choice. Instead, staying invested may be better if:
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The underperformance is for short-term because of market correction.
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Your investment goal is for the long-term, which is usually more than 5 years.
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The fund has a proven good past performance but is hit by temporary sector issues.
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You have a diversified portfolio that balances the risks and returns.
Should You Exit Underperforming Mutual Funds in 2025
Sometimes it’s smart choice to reduce your losses and switch from existing fund:
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If your fund performs worse than its competitors and benchmark for more than 2 years because of regular poor returns.
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If the AMC changes the investment objective, make sure to check if it still suits your financial goals.
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If your invested fund has a high expense ratio and also delivers low returns for a long period.
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If you find a better-managed fund that matches your financial goals.
What to Do Before Taking Action
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Consult an Advisor: A SEBI-registered financial advisor can help you review your portfolio.
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Rebalance: Sometimes switching to funds within your asset allocation works better than withdrawing all units.
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Follow a Strategy: Never chase returns blindly and have the mutual funds strategy India.
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Systematic Transfer Plan (STP): If you withdraw, make sure to use STP to move money gradually to another fund to avoid market timing risks.
RBI Financial Education Resources
How to Choose the Right Replacement
If you are deciding to exit, then know how to choose the right mutual fund in India by following these important tips:
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Make sure to look for consistent returns from the last 5 to 10 years.
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Check the experience and strategy of your fund manager.
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Compare expenses ratios of different funds.
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Match your investment with your risk appetite and investment time frame.
Final Thoughts
Exiting or staying invested is not the same for all decisions. Always make sure to check the facts, compare your options and stay focused on your financial goals. A smart and disciplined underperforming mutual funds in 2025 decision works better than emotional decisions. Review, rebalance, and stick to your plan to build wealth with confidence.