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Should I exit now to save myself from the upcoming crash?

Markets can be irrational for a prolonged period of time. So, withdraw the money that you need in the next one-three years systematically or else, stay invested, advises Dhirendra Kumar

The Sensex and Nifty went down to their lowest level in March and since then, they have recovered a lot within a short span of three-four months. Would you advise investors to exit if the NAVs of their funds have come up to the pre-crash levels so that they don't participate in the fall again?
- Anonymous

Firstly, we are assuming that the markets will fall. The markets can be irrational for a prolonged period of time. Hence, the assumption that the markets will definitely fall may not necessarily be true. Most of the time, big moves in the markets happen quite unexpectedly. The big decline came as a surprise. Similarly, when everybody ran away from the markets, they actually moved up and recovered most of the losses.

So, my advice would be not to exit your investments. If at all you have to come out of the market, the primary reason should be that you need the money in the next one-two years. If that is the case, then you should start preparing for your exit from the market without waiting for the last moment. If you need the money in the next three years, still you should take out a substantial part of your money, as we don't know what the state of the markets will be when you would need that money. The long-term money, which you don't need in the next five years or more, should be there in the market. But if you are likely to need the money in the next one-two years or upto five years, then you should work as to how much money you would need and methodically, take that money out. Start doing your withdrawal plan similar to the way you have been doing your SIP.

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