What to do if mutual funds are giving negative returns?

Review the risk data and performance numbers (vs index and its peers) of the scheme for the last 7-10 years. If you find inconsistencies in the abovemnetioned data for at least 4-5 quarters, you may want to evaluate exiting the fund. While executing the exit be mindful of the tax implications and exit loads. Be clear that you are not judging in a hurry and remember that the preformance most often is in line with the equity markets benchmark. 

However, it could also be a debt fund during an interest rate hardening cycle or a debt fund having poor credit quality securities which could be losing the money. If its the fomer you could hold it longer till the cycle starts turning or till the accrual returns make good the loss. If latter is the case, please consult your advisor for actionable. 

Every MF Scheme in a portfolio of a client is chosen with a clear objective and has a benchmark return for comparision. For example, in an upward trending growth market, a value oriented scheme may give negative returns. Small cap scheme may give a negative return during the commencement of a long term bull run due to focus on large cap. One needs to always evaluate the overall performance of a portfolio before taking a decision on an individual scheme. A gold fund may give negative return when equity schemes are doing well. Therefore, we have to evaluate the reason for negative returns, compare with benchmark, look at the period for which negative return is happening, before taking a decision to redeem / change / or continue with the scheme.
 Stick to your Basic Investment Plan as Time Horizon of your investment and Risk & Reward Ratio. Please review the Fund in detail and Analyse for what reason it is down if the whole sector or segment is underperforming for any specific reason wait for some time. Take the Help of the Advisor to review and take decision on the Subject.

 

All the data/information shared above are opinions/ views that solely belong to the Mutual Fund Distributors. UTI Mutual Fund (acting through UTI Trustee Company Pvt Limited) / UTI Asset Management Company) owes no responsibility/ liability whatsoever in this regards. The information contained should not be construed as forecast or promise, and the only objective of this initiative is to educate the consumers to take a more informed investment decision. Any investment decision taken based on the information provided in the content above shall be at sole risks, cost and consequences of the user.



 


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