What to do when mutual funds are down? (2024)

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What to do when mutual funds are down?

Date : 15/09/2022
Read: 3 mins

This year has been full of volatility, and it is possible that your mutual fund investments are down! Here we discuss what needs to be done in such a situation.

This year has been full of volatility in the stock markets. At the beginning of the year, we have seen a bearish market because of high inflation, hawkish central bank policies and geopolitical tensions like the Russia-Ukraine war and China-Taiwan skirmishes. The market strategy in such a situation needs to be different. We cannot be bullish all the time.

When your mutual fund portfolio goes down, you're bound to get questions regarding what to do with your portfolio. This is a common concern among investors even when they know the law of gravity that mutual funds can't be up all the time. What goes up needs to come down, but when it comes to your mutual fund portfolio, most investors do not want to see their portfolio down.

Your mutual funds can have different strategies and a mix of asset classes like equity, debt commodity, etc. While equity mutual funds offer growth potential, debt mutual funds offer downside protection. Hybrid funds are a mixture of the two and can offer the benefits of both. Since stocks, bonds and commodities can go up and down, and mutual funds can go up and down as well. When the economy is jittery, the mutual funds can go down. Here we discuss what to do when your mutual funds are down.

Managing your down mutual funds

Here is what you should do when your mutual funds are down:-

1. Relax- As human beings are emotional people, you should ensure that your emotions do not affect your mutual fund portfolio. First, you need to relax and then take the decisions logically and not emotionally.

2. Continue with your SIPs- The advantage of SIPs is that you invest every month. Therefore, if you invest in a bearish market, you will be able to buy more units of the mutual fund. This will ensure that your average cost of the acquisition comes down. When the markets are down, it is usually a good time to load up on stocks and mutual funds.

3. Do not exit your mutual funds- You should not exit your mutual funds in haste. When mutual funds are down, there is usually an up move in the future, as has been seen historically. Therefore, you should stay invested in your mutual funds.

4. Maintain your asset allocation strategy- A bearish market is not the right time to change your asset allocation strategy. If you stay consistent in your asset allocation strategy, you can make long-term wealth.

What to do?

You just need to relax and ignore the market. Usually, it is a good strategy to invest more in a bearish market, but you should not interfere with your core strategy. If you have excess cash, you can invest more as well. And also, you should remember that just because you're mutual funds are going down, there is no reason to panic. Stay calm and continue with your investment journey.

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Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.