He needed Rs 3 lakh. He didn't redeem his mutual funds

Summary: When a friend texted asking whether to sell his equity funds for a short-term crunch, the answer wasn't yes or no. It was a question he hadn't thought to ask himself first. "I need Rs 3 lakh urgently. Should I redeem my mutual funds?" A friend texted me last month. When we spoke, his voice was steady, but there was an undercurrent of hurry. "What happened?" I asked. "Nothing big. Just a short-term cash crunch. I'll rebuild it in a few months anyway." To him, it was already settled. Money needed, investments sold, problem gone. Clean and simple. That's the default move for most investors. When life needs cash, the portfolio is the first place they look. The cost you don't see coming "Which fund are you thinking of selling?" I asked. "My equity fund. It's done well. I'll just pull some out." That's where I had to slow him down. When you redeem, three things happen in the background. You will owe tax. You might get hit with an exit load. And then there's the third thing, the one nobody talks about enough: you break the chain of compounding. That last one is invisible on paper. But over time, it's the most expensive of the three. "Think of it this way," I said. "You're not just withdrawing Rs 3 lakh. You're also giving up everything that money was going to grow into." He was quiet for a moment. "But I'll

This article was originally published on March 19, 2026.