Stop loss by not stopping

Getting hurt by volatility, often mutual fund investors decide to discontinue their investments. Some begin by taking a 'pause' and eventually forget about pressing 'play' on investments. And some make the mistake of delaying investments to a future period, saying 'let me wait it out'. Unfortunately, in all these cases, investors lose gains. In a bid to time wobbly markets, investors forget that their small mistakes can cost them big. Would it be okay if you missed a month and lost an opportunity to make 50% gains in a midcap fund? How about sitting out in a quarter where your smallcap fund more than doubled money? Who would you blame if your well-intentioned investment 'pause' lasted a year and caused a 234% opportunity loss in a multicap fund? Let us look at a few examples of some popular funds. Large gains With volatility in domestic markets on the rise, especially in 2018, many retail investors have been considering stopping investments. They flood experts with queries such as 'should I discontinue investing till 2019 election?' While on the face of it, political uncertainty can be harmful for markets, second-guessing what Mr. Market will do is a tough job. The reality is that nobody knows for sure what will happen. Short-term predictions run the biggest risk of going awry. Still, long-term investors take such calls and ultimately may miss out on big gains. Let us have a look. Largecap funds are popular for a variety of reasons. Firstly, these funds invest in tried-and-tested stocks. Secondly, they are less volatile. Thirdly, largecap firms give back a lot of cash in form of dividends, creating an extra source of income for investors. However, largecap funds are no raincoat if markets face inclement weather. Like a sturdy umbrella, largecap funds do weather the storm better than others but you are not likely to be completely dry. But when markets tumble, some investors do stop investments even in vintage largecap funds. As a result, you could miss great opportunities to make money. We looked at the best months, best quarters, and best years of popular largecap funds. In some cases, these 'best' periods came right after periods when the funds suffered the worst of times. For instance, HDFC Equity Fund, like many others, was completely distraught in the second half of the calendar year 2008. Between September 26 and October 27, 2008, the fund lost over 31%. In the quarter ended December 2, 2008, the scheme went down by 40%. It is quite likely that some investors jumped ship. But therein is the cardinal mistake. It gained 36% from the end of April 2009 to May-end. Between March 9 and June 10 i.e. a quarter, HDFC Equity Fund rose by 95%. Largecap funds Best month Gain % Best quarter Gain % Best year Gain % HDFC