Mutual funds in India are going through a tough time right now, and there are a few reasons for this. The global economy is facing some challenges, which affects investments everywhere. In India, the Reserve Bank (RBI) has kept interest rates high to fight rising prices.
Mutual Funds are going down, this impacts both stocks and bonds in different ways.
When interest rates are high, it gets more expensive for companies to borrow money. This can lead to lower profits, which often causes stock prices to drop. As for bonds, when new bonds come out with higher interest rates, the older ones become less attractive, so their value goes down too.
The reason behind the drop of Mutual Funds in 2024:
Here’s why mutual funds are going down in 2024:
- In 2024, mutual funds in India faced challenges due to global factors like geopolitical tensions, leading to cautious investor behaviour.
- Foreign Portfolio Investors (FPIs) are withdrawing funds, causing market volatility and declining valuations in Indian markets.
- Domestically, high interest rates set by the RBI to control inflation have negatively impacted the Net Asset Values (NAVs) of both equity and debt mutual funds, particularly in sectors like real estate and infrastructure.
Is It Good to Invest in Mutual Funds Now when mutual funds are going down?
Whether it’s a good time to invest depends on your personal situation. If you’re thinking long-term (5-10 years or more), the current dip could be a chance to buy funds at lower prices.
But if you need the money soon, it might be wiser to look at safer options like short-term debt funds or fixed deposits until things settle down.
Historic Data of Performance of Mutual Funds in India
To put things in perspective, let’s take a quick look at how mutual funds are going down and how Mutual Funds have been done in the past:
- Over the last 20 years, big company (large-cap) equity funds in India have given returns of about 12-15% per year on average.
- During tough times, like the 2008 financial crisis, many funds saw big drops. But they bounced back and even grew higher within a few years.
- More recently, when COVID-19 hit in 2020, funds dropped sharply at first but then recovered strongly. Many gave returns of over 70% in the following year.
This shows that while there can be scary drops, mutual funds have historically recovered and grown over time.
Should I Exit From Mutual Funds Now?
Before you decide to exit your mutual funds, take a moment to think about a few things. What are your financial goals? How is your fund doing compared to similar funds? How long were you planning to stay invested?
Remember, in the past, people who stayed invested through the ups and downs often ended up doing well. But everyone’s situation is different, so it’s important to think about what’s best for you when mutual funds are going down.
Is It a Good Time to Invest in Mutual Funds SIP Now?
Systematic Investment Plans, or SIPs, can be really helpful when markets are going up and down. They let you invest a fixed amount regularly, which means you buy more units when prices are low. This way, you don’t have to worry about trying to guess the best time to invest. Over time, this approach can lead to better average purchase prices.
Conclusion
While 2024 has been a challenging year for Mutual Funds, it’s important to stay calm and think things through. By understanding why this is happening and sticking to sound investment principles, you can navigate these tricky times. Remember, every market downturn in history has eventually been followed by a recovery. Stay informed, keep your investments diverse, and don’t lose sight of your long-term goals. With patience and a smart approach, you can weather this storm and potentially come out stronger on the other side.
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