Are you questioning ‘mutual fund sahi hai’ after 10% portfolio loss? Expert explains bigger picture

Synopsis

Recent market volatility has many new mutual fund investors questioning their choices, especially with portfolios showing losses. Experts explain that market-linked instruments like equity funds naturally fluctuate with global events. While short-term dips are common, patience and a long-term view are crucial for wealth creation. Understanding your risk tolerance is key to deciding if mutual funds are the right fit.

Recent market volatility has left many mutual fund investors questioning their decisions, especially those who started investing over the past couple of years. With portfolios slipping into losses and returns looking unimpressive in the short term, a common doubt is emerging—kya mutual fund sahi hai?

A query from Lari, a government teacher from Madhya Pradesh and a viewer of The Money Show on ET Now, reflects this sentiment. She says her mutual fund portfolio is down nearly 10% and she is struggling to see any benefit so far while investing in mutual funds.

Also Read | Equity mutual funds lose up to 48% on SIP investments in FY26. Have you added any to your portfolio?

Best MF to invest

Looking for the best mutual funds to invest? Here are our recommendations.

View Details »

According to financial expert Harshvardhan Roongta, this is a very common concern, particularly among new investors. Those who have entered the market in the last one or two years may even see negative returns in their SIP investments, leading to doubts about whether they made the right choice. Naturally, many begin comparing mutual funds with fixed deposits, wondering if a steady 6% return would have been a better option.

“So, you might question yourself thinking whether you have done the right thing because the common comparison that investors would have if after two years or three years they see their portfolio negative the first thing that comes to their mind is that it would be better if I put my money in fixed deposit, at least I would have got 6% per annum. So, these are the things that usually investors are definitely confused with,” the expert said.

Live Events

However, this comparison often overlooks a key aspect—mutual funds, especially equity funds, are market-linked instruments. Their performance is directly influenced by broader economic conditions, global events, and investor sentiment. When there is uncertainty—be it geopolitical tensions, economic stress, or global disruptions—markets tend to fall, and mutual fund returns reflect that reality.

“Markets will fall when there is uncertainty and they will go up when there is clarity,” the expert further highlighted.

Roongta explains that this behaviour is not a flaw but a feature of how markets function. In fact, it would be more concerning if markets continued to rise despite significant global stress, as that would indicate a disconnect from underlying realities. Market corrections are a natural response to uncertainty, and they help bring valuations in line with fundamentals.

The expert said that, “The question is what actually would be a cause of concern would be that there is war that is going on right now as it is and there is so much of stress on fuel, energy; there is so much of concerns about security and the war escalating, etc, and markets ignored all this and continuously just kept going one way upwards, that would be a cause of concern because it is not doing what it is supposed to do.”

Over time, as clarity returns and economic conditions improve, markets tend to recover. However, this recovery is not immediate. Even if external risks such as geopolitical tensions ease, the real driver of sustained market growth—corporate earnings—takes time to improve. As companies report better performance and the economy stabilises, returns gradually follow.

Also Read | Sebi simplifies gifting of mutual funds. Here's what it means for investors

This highlights an important lesson for investors: equity investing requires patience and a long-term perspective. Short-term volatility is inevitable, and expecting consistent positive returns over one- or two-year periods can lead to disappointment.

At the same time, not every investor may be comfortable with this level of uncertainty. Roongta emphasises that before investing in mutual funds, especially equity schemes, it is essential to understand how they work, what kind of returns to expect, and the risks involved in the short term. Investors who are uncomfortable with market fluctuations may be better suited to more stable options like fixed deposits or other low-risk instruments.

Ultimately, the decision comes down to alignment. If an investor understands the nature of market-linked investments and is willing to stay invested through cycles, mutual funds can be an effective wealth creation tool. But if volatility causes stress and uncertainty, it may be worth reconsidering the investment approach to ensure both financial and emotional comfort.

In volatile times, the real question is not whether mutual funds are “right” or “wrong”—but whether they are the right fit for your expectations and investment temperament.

(Catch all the Mutual Fund News, Breaking News, Budget 2024 Events and Latest News Updates on The Economic Times.)

Subscribe to The Economic Times Prime and read the ET ePaper online.

...moreless

(Catch all the Mutual Fund News, Breaking News, Budget 2024 Events and Latest News Updates on The Economic Times.)

Subscribe to The Economic Times Prime and read the ET ePaper online.

...moreless

HDFC Bank chair exit: Widening rift or a new beginning?

Small- or large-cap stocks: What should you bet on as markets fall?

HDFC Bank seeks to rebuild trust, the biggest currency in banking

Looking for a job? This city has plenty, few takers

AI is reshaping lending, and why it’s bad news for traditional banks

F&O Radar: Bull Call Spread strategy for Bajaj Finserv

1

2

3