Subbu's Solution

I have been investing via SIPs for three years in a few funds.

In March 2015 I was getting an IRR of 30%. Since March, I stopped investing in these funds and started investing in other funds. Now I see that the IRR for the old funds has dropped to 17%. Should I cash out immediately? I do not need the cash but I feel if I stay invested in the funds the IRR will fall further and I will lose more money.
Investors need to understand that Equities has a potential to give high returns, but it is also a high risk asset class. So, the trick is, the longer you stay invested the chances are your investments will average out market volatility and generate good long term returns. Also, you must only cash out your investments in two conditions – If you have met your financial goals or if you are in a need of some urgent money. I understand it is neither of a situation for you, so in my view - stay invested. SIPs are one of the best ways to invest in equities. Therefore you should re-start your SIP after analyzing the suitability of the fund for you - based on your risk appetite. In addition to SIP, whenever the market declines, if you add a little more capital to your investments, then your IRR could be further enhanced.
Therefore, as long as it is a good fund that you are invested in, don’t be scared of market volatility or of the declining IRR. Over a long period of time, the potential to earn higher return from this asset class is still good.
I would also suggest that you consult a financial advisor before taking any investment related decision.


Subbu's Solution is authored by I. V. Subramaniam. I. V. Subramaniam is a director of Quantum Asset Management Company Private Limited. The responses expressed here are strictly for information and explanation purpose only. The responses are meant for general reading purpose and not to be considered as an investment advice / recommendation. The responses are not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or units of the Mutual Fund. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in the responses.

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