Like you plan your investments to achieve financial goals, you need an exit plan to optimise gains and ensure you don’t outlive your corpus. Many investors usually fall for the herd mentality: they invest more when markets are high and exit when they are down. One can avoid this trap by adopting a goal-based approach to investing or exiting the markets. Many factors can contribute to market volatility. Micro and macro-economic situations, internally and externally, and geopolitics, among other factors, could influence market movements.

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A long-term strategy for investing and exiting the investment schemes will help you weather the periodic ups and downs in the market and reap maximum benefits. Therefore, a goal-based approach is crucial for your exit plan from the market, taking into account the required financial corpus and goals. While making exit decisions may not be complicated in the case of fixed deposits (FDs) and other fixed-tenure instruments like pension plans, they can be complex in equity-related instruments. For example, in fixed-income instruments like FDs, Sovereign Gold Bonds (SGBs), National Savings Certificates (NSC), and Senior Citizen Savings Schemes (SCSS), the exit roadmap is clear unless one wishes to make a premature withdrawal. Also, depending on the interest rate scenario, investors can decide whether to consolidate their investments in the short term or increase them to lock in higher interest rates for the long term.

In the case of equity investments, the story can be different. Equities can provide inflation-beating returns in the long term, so the exit strategy for these instruments will be different. Although most seniors shun equity investments considering the market risks, experts recommend that a calculated exposure to equities is not a bad idea in the long term. Equity instruments in a senior portfolio include mutual funds, exchange-traded funds (ETFs), etc.

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Exit Strategy:

The exit strategy will depend on whether you have reached the desired financial corpus.

Pradeep Suryavanshi, founder and CEO of Bestmate Investment Services Private Ltd, says investors should plan their exit based on their goals while monitoring market movements. “As far as current market volatility is concerned, the valuations are good. Seniors may invest or remain invested in index and large-cap funds but should avoid thematic, sectoral, and small-cap funds. If their mutual fund net asset value (NAV) has gone down more than 15-20 per cent in the last 15-20 days, they should consider switching to larger or multi-cap funds.”

For fixed-income instruments, he says, “Inflation rate is within the acceptable range; the Reserve Bank of India (RBI) will decrease the rate but probably towards the end of the year. There is no hurry to exit from existing FDs and lock in long-term FDs as of now, but the day the first rate cut is announced, investors can look for the best rate available and accordingly rebalance the portfolio. One may also invest in bonds and non-convertible debentures (NCDs).”

Many investors also use the tax-loss harvesting strategy for exit, primarily to offset long-term capital gain or loss in a financial year. It is a short-term tactic to save money on taxes. Finally, like entering a capital market, one should also exercise due diligence for the exit, which is structured so that the funds can meet all requirements.