Apart from needing access to your funds, in what circumstances might you consider withdrawing your investment from a managed fund?

Is your fund not performing?

If your fund has consistently under-performed others of the same type, you should look at the reasons why it has under-performed. Your fund manager may, for example, have an emphasis on “value” stocks when the market is assisting the “growth” manager.

Managed funds are generally geared towards maximising returns over a longer time frame. So be prepared to see out short-term volatility and decline, perhaps over a period of as much as a year. But if decline means under-performance against like funds and a relevant external benchmark, over a period of a year or so, then that is the time for you to consider liquidating it.

You should also think about the other side of the equation; should I be avoiding withdrawal unless it is obvious my money could be put to better use elsewhere. Turn your mind to that, before you cash your existing fund in.

If your managed fund is yielding a lower return than you anticipated, you may be enticed in to cashing in your fund units and investing your money in another fund.   Don't yield easily to that sort of temptation. You will almost always see funds that are performing a lot better than yours, until you switch your money into them!

Has the fund or manager changed?

Sometimes a fund invested in small-cap stocks for example may become too large because of that market's low volumes and liquidity.

If you began with an investment in a fund that met your financial needs and the strategy of the fund changes, it may be time for a re-evaluation.

If your fund incurs capital losses and you have large realized capital gains from other investments, you may want to cash in your units so that you can apply the capital losses off against your gains.

The management team may have changed and the new managers are not delivering. Check the new folk out. Get advice. In some circumstances you may be better to hang in there, at least for a while. Then cut your losses.

How do I sell?

If you have decided to sell, most funds will allow you to sell part or all of your investment in the fund at any time.

Requests for withdrawals need to be in writing. Generally units are redeemed and the funds made available within five business days of the request.

The other option of course is switching to another fund under the control of the same fund manager. A switch from one fund to another involves the redemption of funds in the fund you are switching from and an application for funds in the fund you are switching to. Fees may be involved including the differential in the contribution fees between the two funds.

Be careful about the tax implications of switching from one fund to another and remember there is also the “cost” of the buy/sell spread.

So consider carefully before you sell  

You originally put a great deal of thought in to your selection of this fund. Now make sure you have good reasons to pull out. Don't do it on impulse and don't necessarily be enticed by the fund over the fence that this year has performed better than yours.