1. I have completed 1 year of my investment in large and mid-cap funds. I have lost money and my returns are negative. Should I withdraw?

You should have a time frame of 5 to 7 years when you’re investing in equity mutual funds. In the short run, there are many factors that can affect the performance of the markets. These returns can be skewed because of rallies and bear phases. In 2017, the small- and mid-cap sector rallied up to 30% in one year, inflating returns. However, 2018 and 2019 have seen corrections from the overvaluations of companies. Over a longer term, the SIP returns follow the growth in the economy. These short-term cyclical fluctuations also get ironed out over a longer term.

2. Should I change my scheme because it has not given me returns in the last year?

There are many factors to be considered when you analyse the performance of a mutual fund. Thus, you must consider the returns over a period of 3 years and compare it to its peers. If a fund has underperformed over the last 3 years as compared with the benchmark and other peers, then it is time to shift. However, take these decisions only after consulting your financial advisor.

3. How long should I continue making SIP investments?

Ideally, you should make your SIP investments linked to your goals. For operational ease, distributors suggest a perpetual SIP when you start investing. This can be stopped at any time by making a request online or offline. You should make investments based on your goals and your risk tolerance.

4. Should I continue investing in the same fund even if the SIP returns are negative?

If the market is down, you may use this opportunity to reduce your cost of acquisition by continuing SIPs. This may benefit you when the market picks up. Keep making investments based on your monthly income and increments. Analyze the fund performance, the holdings, the returns and its peers before you choose to shift. Be sure to increase your investments along with your income growth.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.