Markets are Down - Should I Sell Mutual Funds or Buy More?

21 September 2022
4 min read

India's stock market is down, and you've got mutual funds in your portfolio. What do you do?

We don't blame you for being nervous about your invested money. 

First of all, don't panic! That's the first thing investors should do when their markets crash—and it's precisely what we want to avoid here. However, just because the markets are down doesn't mean that you should bail out of your investments just yet. If you want to maximize your returns while they're down and avoid losing more money than necessary, then some key things can help keep you from panicking:

Panic causes investors to make poor decisions and sell out at the wrong time—and it can cause them to lose everything they have invested in their fund. Don't let yourself get into this position; instead, stay calm and calculate how much money you need to come up with before being able to reinvest.

If your funds have been losing value for a while now, it might be time for an overhaul or even closing altogether until things improve again.

When the markets are down in India, it's essential to take a step back and evaluate your investments. You may be tempted to sell them, but that's not always the best idea.

What Should an Individual Do When The Market is Down?

This is a question that many investors ask themselves, and it's one that you need to consider before making a decision. If the market is down, you might be tempted to sell your shares, but this can be the wrong choice for several reasons.

First, selling your mutual fund when the market is down will cause you to lose money.

Second, if you trade in this situation, you may not be able to get back into the same mutual fund again at a future date because of how funds are structured.

Finally, suppose you decide to sell your mutual fund during an economic downturn like this one. In that case, it could impact the price of other investments in your portfolio—including stocks—which could negatively affect your portfolio. 

When the stock market is down, it can be challenging to know what to do.

Even if you're not a stock trader yourself, you should consider plenty of things when the markets are in turmoil.

Remember not to lose your calm. Even if your portfolio seems to have taken a hit, don't sell everything at once or take out loans to cover your losses. If you're invested in a retirement account or another investment vehicle with strict rules about liquidating assets before retirement age, wait until you can afford to retire before selling anything. Give thoughts to every step you take calmly.

Secondly, learn not to put all your eggs in one basket. While diversification is essential in any investment portfolio, it can be especially crucial when there's turmoil and investors are trying to figure out what's happening next with their investments.

It would help if you looked at other asset classes besides stocks like real estate or commodities like gold and oil as possible investments that won't suffer as much when the stock market drops (and they may even provide benefits during times like these!).

Should You Sell Your Mutual Fund When The Market Is Down?

The answer to this question is yes and no. Let us look into both scenarios. 

Yes, it would help if you sold your mutual funds when the market is down because when you do so, you can use the money to invest in other things. You may have some cash left over after selling your mutual funds, and if so, you can use it to invest in something else that will provide a more significant return on your investment.

However, it is terrible for your finances if you sell your mutual funds during a market downturn and decide not to sell them after they go up again. This is because you will be losing out on the opportunity to make money from the rise in the value of your funds when they come back up. If this happens over time, it can lead to a significant loss in capital for you.

Selling mutual funds during a downturn does not mean they will always go up again. It just means that there will be more chance for it to do so than if you had held onto them until later when the market has calmed down and begun its climb again.

So it is essential not only when looking at how much money you want to make from selling them but also how long these fluctuations will last before they start heading back up again and making more profit for yourself through owning these shares instead.

Conclusion

When the stock market is down, it's great to look at your portfolio. But are you doing enough to protect your investments? Are you diversified enough? Do you have the right mix of stocks and bonds for your age and risk tolerance?

If you're unsure what makes up a good investment mix, it may be time to get professional help. The best place to start is with a financial advisor who can help you decide what types of investments would be best for your goals and needs, whether adding more bonds or focusing on companies with good earnings growth potential.

It's also important to remember that a downturn in the market doesn't necessarily mean that your investments are bad. If you've chosen wisely, even if the market drops over time, your portfolio will still produce enough income to keep growing while remaining safe from loss.

Disclaimer

The stocks mentioned in this article are not recommendations. Please conduct your own research and due diligence before investing. Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.
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