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What to do if there is LOSS in Mutual Funds

  July 24,2021

What to Do if You Are Losing Money in Mutual Funds?

The performance of the underlying securities and the broader markets are two factors that decide whether your mutual fund portfolio will be in green or red. 

Mutual funds don’t guarantee any returns and there is a possibility of facing adverse scenarios.To avoid such a phase, you must have a better understanding of mutual funds before investing.

Fund managers, managing mutual funds, invest in several stocks, commodities, and bonds, reducing the impact of poor performance by the underlying securities. However, the profit or loss in the mutual funds depends on stock performance, market volatility, economic growth etc.

So, if you think you are losing money in mutual funds, here is what you can consider doing.

What to do if there is a loss of money in mutual funds?

Even if you are well-versed with all the aspects of mutual funds and their working, some adverse scenarios might lead to losses. If that is what you are facing, here are some tips to help you.

1.Avoid Redeeming in Haste

Even if you are losing money in mutual funds, you must think twice before redeeming your money.

Mostly, people take their money out of mutual funds and wait for the market to climb again for re-investing. But the time might not always be perfect. It could lead you to a position where you end up investing at a price higher than what you sold the mutual funds for. This isn’t good for the overall wealth generation process and so such a decision must not be taken in haste.

Moreover, redemption must not be decided based on current market situations as markets tend to go and down. Furthermore, a better option to be saved in such cases is investing in mutual funds via the SIP route that frees you from the timings of the market.

2.Compare Performance with Other Funds of the Same Category

If the market is not going well or your mutual funds are performing poorly in your mutual funds, in such instances, you can compare the performance of your mutual fund with other similar funds of the same category.

If your fund’s performance is similar to the other funds, you need to be patient with your investments. Even if you found only a slight difference in the performance of your mutual funds and the others, you do not necessarily have to consider switching.

This is advised because the difference in such performance is only evident for a shorter period. In the long run, the best mutual funds of the same category mostly give similar returns.

3.Compare Performance with Other Funds of the Different Categories.

Some mutual funds are more volatile, which means that they might offer greater returns along with higher risk. If you think you cannot manage the involved risk, you must look at other categories’ mutual funds and performances.

4.Research the Sector Profoundly

You might also lose money in mutual funds when your investments are sector-focused (the funds that only invest in some specific industry or sector). Even when the overall market is going well, some sectors might suffer a fall. Therefore, if any sector underperforms, you must research it well.

Sector funds are riskiest and are very hard to predict as compared to other diversified equity mutual funds. Thus, if you are losing money due to an investment in sector funds, you must focus on the industry’s health and prospects.

It is advisable to continue investing if you think that the industry/sector has a promising future. Otherwise, you can plan to redeem your money and invest in some other mutual fund. Further more, you can also consider diversifying the mutual funds and have a mix of different funds.


There are plenty of reasons that may lead to setbacks in an economy, including elections, geopolitical tensions or recessions. This can adversely affect your mutual funds, and you might start losing money.

 But you must always handle the situation calmly and wisely and never hastily. It would be best if you take the help of professional before taking any action, and in that way, you will not have to bear significant losses.

 This blog is purely for educational purposes and not to be treated as personal advice. Mutual fund investments are subject to market risks, read all scheme-related documents carefully.