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Many new DIY mutual fund investors stare at huge losses

Many new Do-It-Yourself investors who have entered the market in the last two to three years are staring at a loss of 30-40% in their mutual fund portfolio, say mutual fund advisors who have recently interacted with these investors.

ET Online|
Last Updated: Mar 26, 2020, 12.38 PM IST
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Many new Do-It-Yourself investors who have entered the market in the last two to three years are staring at a loss of 30-40% in their mutual fund portfolio, say mutual fund advisors who have recently interacted with these investors. Many individuals have started investing in mutual funds after the central government's demonetisation drive that banned certain currency denominations three years ago.

According to Value Research, a mutual fund tracking firm, most equity mutual fund categories have lost around 20-35% in the last one year. The situation is not bright even in the three year period when key equity mutual fund categories have posted single-digit losses. The stock market has lost around 30-35% in the last two weeks on fears of the impact of Covid-10 pandemic in the country.

"Investors who have been in the market for six or seven years still have made some money, but the new investors have lost heavily," says a mutual fund advisor who have interacted with some DIY investors recently. He says most of these investors were nervous about their investments as many of them were not familiar with basics of mutual fund investments.

ETMutualFunds.com have been tracking this segment since last three years. In fact, we put together a special section to address the concern of this category. For more, see: Strategy for direct or DIY investors

We always held the view that direct mutual funds are meant for well-informed investors. We also believe that all well-informed investors would not have the time or inclination to handle their investments on their own. That is why we have been saying that only well-informed investors who are disciplined and ability to devote time should opt for investing directly in direct mutual funds. Others are better off with a mutual fund advisor.

Having said that what should these DIY investors staring at huge losses do? Nothing at the moment, say advisors. Since the entire market has tanked, you will not make any headway looking at the category average returns for various periods. Remember, the sharp fall in the last few weeks have wiped out most of the gains made even long-term investors.

The most important thing for you to at this point is to make sure that your finances are in order. Revisit your insurance covers, both life and health covers. Also, ensure that you have an emergency fund that would take care of your living expenses for six to 12 months.

You should also reevaluate your choice of mutual funds to make sure that they are in line with your risk profile.

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