Dhirendra Kumar explains how to handle the losses in small caps
I invested in a small-cap fund a few months back without understanding how risky they can be. But now I have realised my mistake. What should I do? Should I book the losses and exit?
Portfolio diversification by investing in small cap could be promising over the long term. So, if you are young and have time, live with it and learn. You should invest regularly and use this time for the compounding of returns. But if you are losing your sleep or having a tough time living with the declining value of your investment, then these funds are not meant for you.
However, I would emphasise that small caps have fallen as much as the mid caps and a little more than the large caps in this recent phase. So, as an equity investor, you could not have saved yourself from a decline in portfolio value. Live with your temporary losses and carry on with your investments.