Losing money in mutual funds? Do these 7 Things!

Losing money in mutual funds? Do these 7 Things!

Mutual fund investors are looking for higher returns and invest in equity mutual funds. These mutual funds invest in the stock market. Because they are market-linked funds, mutual funds can be affected by market movements. This is why mutual funds also fall in value.

Investors panic when markets are down and make decisions that may not be best for them. Here are seven things investors can do to protect their investments.

Keep Yourself Calm 

This is the first step towards investing success.

Stock markets generally perform well over a long time. Volatility causes price movements in the short-term. Although you may lose money in mutual funds if there are market disruptions in the short term, chances of negative returns dramatically decrease after 3-4 years. 

You can see that if you have a longer horizon, say 7-10 years, the news will not disturb you and cause you to lose your calm. Don't let the noise distract you. Certain investors believe they can take their money out of a mutual fund when its value goes  

Totally Avoid Redeeming In Haste

You can lose money on mutual funds in declining markets. Yes. However, does that mean you have to redeem your investments? No. No.

In most cases, equity mutual funds that have been redeemed within a year of investing will attract an exit load of 1%. If your investment gains exceed Rs 1 lakh, LTCG tax may apply.

Some investors believe that they can withdraw their money from a mutual fund when it is losing value and then put it back when it starts rising again.

Although it sounds great in theory, this is not always the best option. Most people withdraw their money from mutual funds and wait for the money to stop falling. Then they start climbing again.

The timing of the sale is not always perfect. People sell when the price drops. Then, when they want to invest again they buy mutual funds at a higher price than they sold them. This can hurt the long-term wealth creation process. 

Market conditions should not influence decisions such as redemption. SIP is the best option in these cases, as it allows you to avoid market timing and invest in equity mutual funds. You can also use the rupee cost average to purchase more units in down markets.

Compare Performance in the Same Category With Other Funds

It is possible that you feel your mutual fund isn't performing well. You may feel that the market is not performing well at this time.

Long-term investments can also be made with mutual funds.

When I refer to similar mutual funds, it means mutual funds that fall within the same category. See which mutual funds have the highest ratings for each category to see how your mutual fund does.

Mutual funds can also be used as long-term investments. Switching might not be necessary if your mutual fund performs well compared to other top-rated funds.

Different mutual funds can perform differently over a short time. The best mutual funds in the same category often return similar returns over the long term.

Compare Performance From Different Categories With Other Funds 

Certain mutual funds are more volatile than others. These mutual funds can offer greater returns but also carry higher risks.

You should consider the performance of mutual funds in other categories if you don't feel up to the risk.

Small-cap mutual funds, for example, offer very high returns. However, they are also riskier. Large-cap equity mutual funds are less risky than small-cap equity funds.

You might also want higher returns but be willing to take some risk. You should also look into the best funds available in the other category to invest.

Do Well Research into the Sector

Your sector-focused investments could also be a reason your mutual funds are declining. This is only relevant if you have invested in a sector fund. Sector funds only invest in one sector or industry.

Even though the markets are generally doing well, there can be some sectors that suffer.

You should research any sector that is underperforming.

It's harder to predict than other equity mutual funds that's why Sector Funds are considered to be risky.

If you are losing money from a sector fund, be aware of the industry's health and prospects.

Continue to invest if you believe the industry is on the right track. You should, on the other side, plan to redeem your investment if you feel the industry is not doing well.


This is the best way to combat mutual fund losses at the moment. Add liquid funds to your portfolio if you are only exposed to equity. These funds will not only help you offset equity losses but also make it possible to raise short-term capital. Diversify across asset classes. As gold prices tend to rise when markets close, gold is a great hedge against market volatility. Consider exposing about 5% to gold. 

To Summerize

Mutual funds can you lose money? Yes. Do you need to have a quick reaction when you see a red portfolio? Most likely not. Despite the discomfort, it will pass. The markets have rebounded before, and they will again.

The economy has survived many temporary events, such as elections and geo-political tensions. It has also survived recessions and pandemics. Investing is a long-term endeavor and should be treated as such. You can stay calm, have a vision and keep your eyes open for opportunities.

Best Wishes For Investing and Good Luck for The Future!

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