My mutual fund portfolio has suffered significant losses what should I do?


A reader on our Youtube Q & A session asked, “Sir, my question is as follows: My age is 25 years. I have started sips in MFs since Oct 2021. I don’t have time to analyse stocks ( i have a 13-14 hrs job). I am now sitting on a significant loss. My corpus goal: 2 Cr after tax. Time period to achieve: 20 years”.

“My portfolio:
1. Parag Parikh Flexi Cap fund: Rs. 2500
2. Axis Mid cap Fund: Rs. 2500
3. Canara robeco tax saver : Rs. 5000
4. Mirae Asset tax saver Fund: Rs. 5000
Am I on the right path. Please give some suggestions if I am not”.

Almost everybody who started equity investing in Oct 2021 would be facing losses now. So you are not alone. There are three phases of equity investing. (1) The joy of a bull market; (2) The despair or at least the uncertainty of a market crash and (3) the frustration of a directionless market.

All three phases are good times to start investing in equity and continue investing. No phase lasts forever, and no one knows which phase will be the next unless we use the benefit of hindsight. Many young earners started their mutual fund investment journey encouraged by the bull run after the March 2020 crash and assumed it would never end. It has ended, and the consequences are there to see in our portfolios.

This is a necessary and unavoidable pain that everyone (no matter how experienced they are in the capital markets) must undergo until a bull run treats that pain. There is no other practical choice! That is why we keep saying everyone is timing the market – waiting for that good time.

The more you invest during a painful phase, the more wealth you create when the tide turns. This is the simple secret behind equity investing.

As long as your needs are far, far away (20Y is just that), you can afford to wait and must wait. Such bad times remind us of the importance of asset allocation. We recommend using a 50% equity and 50% fixed income (EPF, PPF etc.) portfolio so that the bad times in equity are reasonable to bear. Always look at the overall portfolio first and then drill down to asset classes (equity; fixed income) and individual funds or stocks.

As regards your funds, please continue investing in them. There is no need to add or remove any funds at this stage.

There are three aspects to creating wealth from the stock markets: Investment, time and returns. Among these, only the first two are in your hands. You have already scored big on the time aspect by starting early. Now focus on increasing your income and, therefore, your investments as much as possible.

There is no evidence that being patient and investing systematically will reap rewards, but the only other choice is guaranteed failure to beat inflation with fixed income. There is no need to despair, though. Systematic risk management constantly keeping our future needs in mind gives us more than a reasonable chance of success. See: Why should I invest in equity mutual funds when there is no guarantee of returns?

Continue investing in a 50:50 asset allocation (you can also choose 60% equity if you are up to it) for the next few years. Learn more about portfolio rebalancing and how to manage your goals in a goal-based way. This webinar may help you get started: Basics of portfolio construction: A guide for beginners.

The above holds true only for long term goals. If your needs are 3Y away or 5Y away, we recommend exiting from all or most of your equity holdings regardless of current market conditions.

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About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.


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My new book for kids: “Chinchu gets a superpower!” is now available!

Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.

Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!

Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!

Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun.

Buy the book: Chinchu gets a superpower for your child!


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