A reader asks, “What should I do with my mutual funds if the market crashes? I started my SIPs three years ago. Today, I don’t know if the market will zoom up or come crashing down. Should I redeem and start again or hold the investments even though I may lose all my gains?”
When we look at a stock market chart it seems like the bull runs and the bear runs are clearly demarcated. Trouble is, that is in hindsight. In real time, regardless of what any expert claims, no one knows what the future marketr movement will be.
So your claim, “. Today, I don’t know if the market will zoom up or come crashing down” is equally true when your first investment or any subsequent investment. Here are some simple truths about the stocks market.
- Big returns come in batches. Bad times also come in batches. The index growth can be viewed as a staircase where each step is of uneven height and uneven width. See: Sensex at 50,000; lessons from the 42 year journey
- The long term returns from the stock market that people make a song and dance about usually came from just a few years in the middle: 44-year Sensex return is 17%, but half of that came from just four years!
When the market is falling it always seems like a smart idea to pull out and hoping we can get back in when it starts to move up. This is nonsense. While timing the market is certainly possible, it will not always be successful. (for the record, time in the market also is not always successful!) Tactical entry or exit comes with unknown risks. See: A risk in market timing that 122 years of backtesting failed to reveal!
A least those who believe in tactical entry and exit have a plan. Many investors wan to time their exit and entry based on social media sentiments! It should be obvious that such a “strategy” is doomed to fail.
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As long as your goal is far, far away, the “safest” place to for your current equity investments when the market is falling is in the market. If you stay invested you are sure not to miss the market uptick. If you keep investing consistently and increase theese investments consistently each year by at least 10%, then the next time you get a bumper 50%-100% annual return, your life will change. Mine did in 2013 after zero returns for the first five years – Fourteen Years of Mutual Fund Investing: My Journey and lessons learned. This is a portfolio update: 15 years of mutual fund investing.
So our recommendation is, do not worry about market levels, social media sentiment, who said what etc. Focus on invesing sytematically for your goals. This means not just setting up SIPs but having a system to reduce portfolio in a goal-based manner.
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Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
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Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 14 years of experience publishing news analysis, research and financial product development. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice. Connect with him via Twitter(X) LinkedIn YouTube Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (Published by CNBC TV18) for DIY investors. 
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
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Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
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