Should I Redeem My Funds Since The Markets Are Down?

Should I Redeem My Funds Since The Markets Are Down?

We all wish for good returns while investing in the stock markets. Everyone wants their invested money to compound and grow exponentially. It helps to secure a promising financial future. However, most people are not aware of the right paths and information. 

With the pandemic just behind us and the ongoing Russia-Ukraine war, things have been quite topsy-turvy in the stock market.

It has led to uncertainty in even experienced investors contemplating their investments in the market. With the NIFTY scores dwindling, most investors wonder – should I redeem my funds since the markets are down?

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Some Facts About Stock Markets

To decide between hold and buy, we need to draw inferences from the past. The markets have fallen every time there has been a major economic or geo-political event.

These events directly impact the economy of the entire nation. The best example is the Covid-19 pandemic. This was when the stock market witnessed a free fall. There are various other examples in the past where markets saw a huge fall.

But one thing was common in all – the markets also witnessed a noteworthy rise. Before the first lockdown in India in 2020, the BSE was trading at 40,000 points (approx.).

After the markets crashed, it came down to 27,000 points (approx.). This panicked a lot of investors who decided to exit the market.

But what followed was a V-shaped recovery where the BSE was back at 40,000 points by October 2020 end. By the end of December 2022, the BSE is at 61,000 points (approx.).

What can we understand from this pattern? It is simple! Markets have recovered every time they fell. While the duration of recovery may be different, it is for sure that the recovery happens after the fall. Under these circumstances, any expert would advise us against redeeming our mutual funds.

This is the right time to buy more units to reduce the average cost and diversify our portfolio with newer investments. Remember that the stock market is more favorable to long-term investors. 

Here, we will discuss the likely scenario of the market to answer the investor’s burning question – Should I redeem my finds since the markets are down?

Types Of Investments And Probability Of The Market

The answer to this question depends on the type of investment. We can invest in the equity market through mutual funds either via lumpsum or a systematic investment plan SIP. To get to the bottom of this, we will dive into the topic one by one-

If we have invested money in the Equity market by a lump sum

Commonly, lumpsum investments require timing the market before buying. If we invest a lump sum amount, we must be quite anxious about the current market conditions. Here are a few things to remember before changing our portfolio.

  • With every bearish run of the market, our losses are only on paper. It means that our losses are not realized until we redeem. Once we redeem our funds, our losses will get real. Selling at a loss was not the reason for our investment in the first place. Also, there is a high chance of recovering from our loss if we keep holding on to our investments. 
  • If we have invested with a long-term horizon, redeeming our mutual funds may not be wise. Instead, we should wait for the tide to get over. Things will bounce back once the markets recover. We will recover our losses with time and earn profits.

If we have invested money through a Systematic Investment Plan SIP

SIP helps investors take advantage of the volatile markets. If we have invested in a SIP, we can take advantage of the dip.

We can buy more units at the same price, decreasing the unit’s initial value through rupee cost averaging. It puts us in a better place to earn returns. 

With every dip in the market, our number of units will keep growing. If we have been investing in a mutual fund through SIP in the last year, we should continue it.

While the markets have been volatile in the last few months, the dip has been steep. It is the perfect opportunity to buy more units at a lower price.

If we continue with our SIP investments, we can recover the losses, if any. Also, our portfolio will grow and give us good returns when the markets rise. 

Should I redeem or not redeem the funds?

They say that when it comes to investing, what is comfortable is rarely profitable. Most of us would like to see our money safe. However, keeping it in a locker or a savings account will not help it grow.

If we want good returns from the market, we should stay invested and be able to take some risks. Also, do not fear the dips in the market.

The uncertainty and the volatility in the stock market should not get the better of us and convince us to sell off our funds.

While this may be a good option if we require urgent funds, we should never redeem our mutual funds under losses.


It’s good to take risks in the market. But often, people have less risk appetite, and lack of knowledge can impact their investments negatively.

So, to understand whether to redeem our funds, it is important to time the market. Further, we should also read the risk disclosure documents of the funds. 

Some basic market research can help us create a list of stocks to invest in once the markets start recovering and ones to sell. Always remember that we should enter the equity market as long-term investors for good returns.

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Frequently Asked Questions

How much gain from an equity mutual fund is tax-free?

Long-term capital gains on equity mutual fund investments are tax-free up to Rs. 1 lakhs. Gains over Rs. 1 lakh are subject to LTCG (Long-term capital gains) tax of 10% + 4% cess. Taxation for debt mutual funds is different as compared to equity mutual funds.

How much tax deduction can I claim from mutual fund investments?

Investments in ELSS mutual funds are eligible for deduction under section 80C of the Income Tax Act, 1961. The maximum amount of deduction that can be claimed in a financial year is up to Rs. 1.50 lakhs.