‘Redeeming your mutual funds only ensures you convert a notional loss into an actual one’


By Kailash Kulkarni

The situation in the market is worrisome and has only multiplied with the COVID -19 virus pandemic now looming on every country around the globe. Markets in India have also been adversely affected and the unpredictability continues. As governments and world organisations are taking stock, measures and methods to handle this outbreak, the battle seems to be long drawn at this point.

Obviously as an investor I am worried. I am questioning myself, my logic and my reasoning as I have seen my net worth being eroded by such a significant sum in such a short span of time. The Sensex has dropped by 30-35% since the past 20 odd days and as an informed person I know that large and small businesses are getting affected. Economy has slowed down and with this pandemic, business across industries, irrespective of their size are seeing some impact and will continue to do so for some time to come. Once things settle down, which we hope happens sooner than later, we are confident that the government will come out with some measures for the industry and people with some kind of a stimulus; the recovery will happen, it’s only a matter of time.

In times like this I ask myself the following three questions:

Can I predict what is going to happen and will it be permanent in nature?

When I reason with myself I clearly understand that no one can predict how long it is going to take for the virus to get under control and life to get back to normal. But historically we have always seen after a calamity, war or incidents with such global impact, people and economies have bounced back. No country and no community have remained stagnant and it is in human nature to overcome difficulties, innovate and progress.

Should I be changing my investment pattern?

Most of my investments in the markets whether done directly or through mutual funds are long term in nature. All my investments were made with a certain goal in mind. Again my reasonable self says that with such credible corporations trading at such low valuations, it is a good time to invest some more in equities. I will definitely not stop my SIPs as I know they will be buying units at very low prices which will boost my returns when markets turn northwards.

Should I be worried about the safety of my investments / corpus and shift to FDs?

I have my asset allocation in debt mutual funds, Bank FDs, PF, PPF etc. I have my contingency funds available in my accounts. Then why should I be driven by fear and not see this as an opportunity? My point is let me be dispassionate, as hard as it sounds, and be driven by IQ rather than EQ. The text book “basics of investing” is to have a financial goal and an asset allocation as per my risk appetite. And this is the time to stick to the basics and have my asset allocation in place.

I believe that everyone is as worried as the other person, but panicking and pulling out everything into cash may not be the wisdom that one has to show in these trying times. Redeeming funds only ensures you convert a notional loss into an actual one. Please assess your risk appetite, your goals and make decisions based on your overall asset allocation which is already in place.

It’s at such a time that an advisor’s role becomes critical. A good advisor holds you through this process and guides you to take the right decisions. The advisor ensures that asset allocation is followed and explains to you the benefits of the same. It would be very wise to work with a trusted advisor, especially in these testing times.


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