I am a retired person. I had invested a lot of money in mutual funds and shares in 2006-07. The funds and scrip that I invested in were good. But in the recent market crash, all my investments have made huge losses. Though I do not need the money for another three years, I wish to know that will I atleast be able to recover the losses and make some profits if I stay invested? I understand that selling now would result in a huge loss. Should I continue investing through SIP or stick to fixed deposits?
-Majumdar
Ideally equity investments are meant for a longer-term horizon of five years and above. It is very risky to invest in equities with a shorter time frame. Since you are a retired person and would be in need of funds in about three years, you should have kept most of your investments in debt instruments to cut down the risk of capital erosion during market downturns.
In the recent crash, almost all funds have slipped substantially from their 2007 NAVs and thus it is quite natural that your investments have made losses. Had you invested atleast three years prior to that, you would have still made some gains. This is the benefit of long term investment in equities.
As of now, it is impossible to predict that when the market will take an upturn but since you have mentioned that your funds and scrips are good, you can still wait for sometime rather than redeeming your investments and making losses now. Gradually you can redeem your investments and transfer the amount into debt funds which suits your time frame.
This article was originally published on November 12, 2008.
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