Should I exit mutual funds in this stock market crash?

Should I exit mutual funds in this stock market crash?


Stock markets are crashing almost every day. Corona virus is not leaving any space of recovery for any country. You might be investor of stock markets and mutual funds. Due to continuous stock market crash, you might be thinking that should I exit my mutual funds now and re-invest when stock markets have stabilized. If you are one among such investor, this article would help you to answer a few of such queries. Should I exit mutual funds in this stock market crash?

Why Stock Markets are falling day by day?


One should understand why stock markets taking correction almost every day.

1) Corona virus – This virus is creating panic across the world. After WHO has declared the virus outbreak a pandemic, stock market fall intensity is increased.

2) Ban on Travel: There is ban on travel in many countries. This would lead to under performance of certain sectors like tourism, travel, hotel, IT etc.,

3) Foreign investors sell-off: In this current situation, foreign investors who invested in Indian stock markets started pulling off money now as there is global fear.

4) Fall in Crude Oil Prices: In the last few days, fall in crude oil prices also hit the sentiment of the stock markets.

5) International Markets down: All global markets are reacting negatively to all these instances. If you have invested in some of the international mutual fund schemes, you would see that your NAV would have gone down.

There is no specific pattern in the stock markets where we can say it can recover very soon. Every day it is becoming even verse. One should work on protecting their mutual fund investments.

Should I exit mutual funds in this stock market crash?


There is no standard answer. This would depend on what kind of investor you are and whether you need money in the short term. Below are the some of the Q&As which can help you to get the answer what you are looking for.

1) I invested in mutual funds for 2-3 year tenure, should I sell my equity mutual funds now?

Investment in mutual funds is a long term game. If you have invested in equity mutual fund schemes assuming that it would reward you in short term, it is the mistake you did. If you need money in next 2-3 years, you should sell and come out of mutual funds by booking losses. This is to avoid further losses in your portfolio.

2) I have invested in balanced mutual fund schemes for 5 years tenure. Should I exit balanced funds now?

Balanced mutual funds would invest 65% in equity (based on investment objective it can change) and the balance in debt instruments. This would help you to reduce equity risk exposure. Balanced mutual funds might work well even for 5 years tenure. However, considering the current virus situation, we are moving towards global recession, the recovery of the global economy might take long term compared to regular downfall we would have seen earlier. If you can extend your investment tenure to 8-10 years, you can continue your mutual fund investments, if not you should exit to avoid any further erosion of your mutual fund portfolio value.

3) I am investing through SIP in mutual funds for long term of 15-20 years, should I worry now?

Since your investment horizon is 15-20 years, which is long term, you should not worry about any downfalls. The worst thing could be that such global recession due to the virus can recover in next 2-3 years and your investments would start moving upwards post that.

4) I am a debt mutual fund investor. Since my investments are not in equity, can I consider as safe?

A debt fund can invest in corporate commercial debt papers depending on the investment objective. Just see what happened to Yes Bank debt papers, where several mutual fund schemes invested in it. RBI indicated that such debt papers have zero value now. Don’t assume that debt mutual funds are safe these days. Take a stock about your debt funds, review them and take final decision to continue or exit.

5) I am investing small amounts through SIP for long term, should I worry about such huge correction?

Huge stock market correction is worrisome for every investor. If you are a long term investor, try to increase your SIP values year on year that can help you to recover such losses at a faster pace.

6) Is this a good time to start my SIP in mutual funds?

Investments in mutual funds through SIP has always rewarded investors I long term as you are investing regularly in a disciplined way. I always advise that there is no specific timing for us to start a SIP. However, when there is a huge stock market correction, you can always add new SIPs or increase the value of current SIPs. Such move can help you to get higher returns when stock markets recover later.

7) Can I sell mutual funds now and buy when I see the bottom of the stock markets?

Do you know when the stock markets are at the bottom? No one can predict where is such bottom. Keep investing at regular intervals which can help you to buy more mutual fund units even during corrections.

8) Why stock markets rise when I sell my mutual funds?

There is an interesting comment from one of the readers. She says whenever I see stock market correction and I sell my mutual funds, stock markets tend to rise. Madam, tell me when you are going to sell your funds, in parallel I would buy J and book profits later-on. Jokes apart. It is our mindset we see that stock market rise when sell our stocks or funds. Next time when you intend to sell your mutual funds, stop doing that action for that day and watch what happens next.

9) When stock markets rebound?

No one can predict this. One should allow stock markets to stabilize post correction. Then look for fresh investments.

10) I am a senior citizen and want to break my FDs to invest in equity funds. Is it a wise decision?

One of our blog readers have put this question. Senior Citizens generally invest in FDs for safety and to get a regular income. Such investors should not move from safe investment options to high risk investment options like Stocks at this juncture.

11) Can I pump more money in equity mutual funds now?

Yes why not, such move would help you to get higher returns as stock markets have taken more than 35% corrections. However, ensure you leave such investments for 8-10 years to grow. Don’t invest now and keep checking the mutual funds NAV on daily basis and get heart attacks.

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Suresh KP

Should I exit mutual funds in this stock market crash

7 comments

  • sanjay VG

    Dear suresh sir,
    I have some of MF which are completed and some are going on.
    Kindly tell me should i stop some fund and start new fund as 2-3 are under persorming.
    See below |( sorry its too much data i posted here)

    completed sip : –
    MF Scheme Monly SIP From To Total Years Total Inv
    HDFC MID CAP OPPURT 1000 July-12 July-13 1 13000
    HDFC MID CAP OPPURT 1000 August-13 Jul-14 1 12000
    HDFC MID CAP OPPURT 1000 August-14 Jul-17 3 36000
    HDFC TOP 100 1000 Sept-13 Aug-16 3 36000
    ICICI FOCUSED BLUECHIP 1000 July-13 Jul-16 3 37000
    ICICI BALANCED 1000 Nov-14 Nov-19 5 60000

    Ongoing SIP :-

    MFScheme Monly SIP From To
    HDFC BALANCED 1000 October-15 Sep-25
    HDFC TOP 200 1000 Sept-16 Aug-26
    HDFC MID CAP OPURT 2000 Jan-18 Jan-27
    ICICI FOCUSED BLUECHIP 1000 July-16 Jul-21
    ICICI BALANCED 1000 Nov-19 Nov-24
    ICICI VALUE DISCOVERY 1000 August-15 August-20
    Birla sunlife front line 1500 April-17 April-27
    Kotak std multicap 1500 Nov-18 Nov-22
    Mirae emerging bluechip 1500 Feb-19 Feb-21
    SBI Focused Equity 1000 Sept-19 Sept-24

    –should i stop any above non-perfomaong fund and start nw fund sip?
    Should i redention of completed sip (table no1) and reinvest later say nov-dec.
    I am 40 yrs old salary man having 1 child and wife.

    Soory too legnthy post

    • Looks most of the mutual funds are good except for ICICI Value discovery fund which has been under performer in the last few years. You can review and exit. Also you have diversified portfolio of midcap funds, balanced funds, large cap funds which is good especially in volatile markets where we don’t know which segment would perform well.

  • D.N.Achar

    timely and useful advice. Have exposures in liquid and short term debt funds.As you remarked
    one cannot assume debt funds are safe now. Although triple A rated. Shall review the debt funds.

  • Vivek

    Useful advice in present crisis. Will request to write on 3 more aspects :
    1. MF which have corrected the least during the current crises
    2. Stocks which one should invest looking at their fundamentals for long term
    3. High dividend stocks

  • R Ramakrishna

    I like to follow the reply of Query 7 in letter and spirit.I may not be able to make hay while the Sun shines but I can buy leafy vegetables at least with whatever is left off in my MF portfolio.To hell with so called Analysts! Rustic village women invested in Gold and they are the wisest.

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