Equity mutual funds losing money? What is in store for you? (2024)

Many first-time investors are feeling disappointed. Many of them say they are staring at losses, it is not possible to verify these claims without finding out where these investors invested their money, whether they have put a lumpsum amount or opted for a Systematic investment Plan. In short, the experience of new investors would depend on their choices. However, there is no denying that many investors, both new and experienced, are feeling the heat in the last three months as the market became extremely volatile and many uncertainties started creeping around.

First, about the market. Yes, the market is likely to remain volatile. However, you need not lose your heart. If you read market forecasts shared by mutual fund managers at the beginning of the year you will note that most of them were anticipating markets to get into rough patch. Most of them had correctly predicted that the developed economies are likely to stop easy money policy. They were also saying that India may also raise rates. Of course, inflation forecasts fell short. Most global economies are facing historically high inflation and pace and quantum of rate hikes could be steep. In short, the market is likely to remain volatile and mostly in a range. So, don’t expect great returns from your equity investments this year.

Does that mean your equity investments are unlikely to reward you? First, you should remember that equity or stock is a long term investment. It is natural for the stock market to become volatile. It is also natural for stocks to offer negative returns for a year or couple of years. If you have entered the stock market or started investing in equity mutual funds in the last two years, it may surprise you. Yes, it may shock some of your stock market experts. However, if you speak to investors who have been investing for a decade or more, they may tell you that they have experienced similar scenarios in the past.

For example, we recently started a series called ‘beating volatility’. We talked to senior mutual fund managers to find out how they tackled such volatile phases in the market. Read the articles here:

Prioritizing asset allocation led to positive investment experience: S Naren, CIO, ICICI Pru MF
Rational people are successful in all markets, says A Balasubramanian

Coming back the present, yes, most equity mutual funds have lost money in the last three months. For this story we are talking diversified equity categories only.

However, most equity mutual fund categories are still offering good returns in the one-year period. See data

If you look at the returns in three and five years, you would say that equity really rewarded investors. Again, we will let numbers speak for themselves. See data

If you look at the long-term returns for, say, 10 years, you will notice that investors pocked double-digit returns. See data:

Remember, most fund managers and advisors always say you can expect 10-12% returns from equity from the long period. The prediction comes from the previous performance of equity in the long term. So, don’t say equity has no future. Just remind yourself that you are investing in equity mutual funds to achieve your long term goals. And it’s natural for the market to be volatile in the short term or offering negative returns.

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