Auto Profit Booking - Mutual Fund

Timing ! and more Correct Timing ! we know in all activities including Investment decisions is so important. Sometime or the other, we have felt "I should have invested in this a year ago and i would have made a killing" or "It was a stupid decision to buy that stock 2 months ago. Rather it would have made more sense to sell it and lock the 10% gain"....Timing our investments is very difficult and even though you have planned when to get in, you have to also carefully plan when to get out.

Recently, i read a news about a new Mutual Fund that gives an option to an investor regarding the exit point. i.e. Auto Redemption of fund units. Investors can choose between 10,20,50,100% return options. With this feature, once the fund returns since invested date reach the desired percentage, the units are auto-redeemed and the proceeds are invested in a safer instrument (such as a debt fund for example).

With this feature, an investor gets his desired returns which are then safeguarded (from value erosion in case of adverse market movement). Plus he doesnt need to track the market to find an exit point. Infact, i feel this feature can also aid to control investor greed. Studies have found that only few people redeem their investment at their desired return level. This is because investors become more greedy after a certain return % is reached and they still want more out of their investment !

I find the auto-redemption feature pretty cool and i wish all AMCs should have this option for all of their Funds especially in these uncertain times. This feature would certainly benefit the common investors. However, ofcourse if the market continues to move southwards, this feature is useless !