I have invested in equity funds which are facing heavy losses. As there's grim news about the world and the Indian economy and its future, is it advisable to switch from existing fund values to liquid funds or safe bond funds now?
- Anand
I would like to present a context that would guide your decision. One is that if you are unlikely to need this investment in the near future, then don't switch. This is because the biggest fall, to my understanding, has already happened and trying to perfectly time it is nearly impossible. So, I would say that if it is your long-term investment (five years and more), then don't do anything. But if you are likely to need this money in two to three years, then by all means take your money out. Your investments are already down in value but by switching, you will be able to protect whatever is left. This will help you protect the value of your money substantially.
To reiterate, if this money is your long-term investments, then don't try to do that. The market makes the biggest move when you least expect it and that we have seen. Biggest market turnarounds (up or downfall) happen in a very brief period and I can tell that based on my own experience of 25-30 years.
We keep telling people about doing their SIPs but it's also important to move a part of your money gradually well before you need it. And this crisis has actually reminded us that we should be a little more conservative. Although the rest of the things we just don't know, you reasonably know when you are likely to need that money. So, just follow what you know.
This article was originally published on April 14, 2020.
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