Sensex lost over 2000 points in one week. What should mutual fund investors do?

The Sensex 5.78% since Wednesday last week. Yesterday’s big drop was a wake-up call for several mutual funds yesterday. They saw their equity mutual funds lose 2-4% in one day. Suddenly, many mutual fund investors are wondering what they should do with their equity investments.

Mutual fund advisors say investors should prepare for some shocks in the days or weeks ahead. Tighter liquidity is likely to change the face of the market. The easy money conditions that helped the market will disappear if the central banks go ahead with their plan. The imminent hikes in key rates will once again keep the market on a slippery slope. The threat of war is another threat the market will face in the coming days.

The future course of the market will also be determined by economic growth, virus threat and inflation concerns. In short, many factors will keep the market in the negative trajectory. Don’t be appalled and don’t do anything stupid, many fund managers say.

This may sound like mandatory canned responses from mutual fund managers. Of course, no one wants to cause panic, but the statement has some merit. If you remember, many fund managers asked investors to temper their return expectations in 2022. They argued that the market could correct very quickly after this strong rise of the last two years. The basic idea is that the market may need to pause for investors to make new returns.

Many mutual fund investors, especially those who have only seen the market gain over the past year or so, are still in hunting mode. Many of them believe that the market may go up again soon. No wonder they talk about lump-sum investments and exposure to their favorite sectors and themes every time the market drops. Go slowly, as the market may test your patience.

Finally, what should you do? Stick to your investment plan. Don’t change your plans based on the mood of the market. Such decisions can backfire when the mood of the market changes. Go slowly. There are many experts who speak with great conviction about market movements. Always remember that no one can predict the market consistently for a long time. So, prevention is better than cure.

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