Mutual funds are one of the most talked-about investments in India right now, yet a large number of investors end up booking a mutual fund loss within the first year itself. If your portfolio is bleeding and you keep asking why mutual funds are going down despite investing regularly, the honest answer is the market isn’t always the villain here. Most losses trace back to investor behaviour, wrong fund choices, and poor timing. Let’s get into what actually goes wrong.
Can You Actually Lose Money in Mutual Funds?
Yes, you can. Mutual funds are not bank deposits. There’s no guaranteed return. Equity funds especially move with the stock market, so when markets fall, your NAV falls too.
But here’s the part most people miss: a falling NAV isn’t a loss until you redeem. Many investors panic when they see red numbers and pull out. That’s when a temporary dip becomes a real loss. Many investors panic during market downturns after seeing negative returns in their portfolio and exit too early. This emotional decision can turn a short-term dip into a permanent loss. On the other hand, disciplined investors who stay invested for the long term often benefit when markets recover.
Why Mutual Funds Are Going Down, And Why That’s Normal
Markets don’t move in a straight line. Short-term falls happen because of:
- RBI interest rate changes
- FII (Foreign Institutional Investor) outflows
- Global slowdowns or recession fears
- Rupee weakness
- Domestic political or policy uncertainty
These triggers affect almost every fund category. So if you’re asking why all mutual funds are going down today, chances are it’s a broader market event, not a fund-specific problem.
The important thing to know is this: none of these is permanent. Indian markets have recovered from every crash, whether it was the 2008 financial crisis, the COVID-19 selloff in 2020, or the 2022 rate hike cycle.
Real Reasons Why People End Up With Mutual Fund Loss
1. Buying High, Selling Low
This sounds obvious, but it’s the number one mistake Indian investors make. People enter funds after reading about 40–50% returns in news articles, which usually means the rally is already over.
Then, when markets correct, fear kicks in. They sell. They lock in the loss. And they swear off mutual funds forever.
A DALBAR study tracking US investor behaviour over 20 years found that the average equity fund investor earned significantly less than the market index – primarily due to poor timing of entry and exit decisions.
2. No Investment Horizon in Mind
Ask yourself, when did you plan to use this money? If the answer is “not sure,” that’s a problem.
Equity mutual funds need at least 5 years to smooth out market volatility. Investors who put in money with a 1–2 year mindset and see flat or negative returns in year one often exit at exactly the wrong time.
| Time Horizon | Suitable Fund Type |
|---|---|
| Under 1 year | Liquid or Overnight Funds |
| 1 to 3 years | Short Duration Debt or Hybrid Funds |
| 3 to 5 years | Balanced Advantage or Flexi Cap Funds |
| 5 years and above | Equity, Mid Cap, or Small Cap Funds |
Matching your fund to your timeline isn’t optional; it’s the foundation of avoiding mutual fund loss.
3. Wrong Fund for Your Risk Appetite
A retired person investing in a small-cap fund. A 25-year-old putting everything in a liquid fund. Both are making the same mistake, ignoring risk fit.
Small-cap funds can fall 40–50% in a bad year. If you can’t stomach that, you shouldn’t be in one. On the other side, if you have a 10-year horizon and stay in ultra-safe debt funds, you’re leaving serious returns on the table.
Before picking any scheme, be honest about two things:
- How long can you stay invested without touching the money?
- How much loss can you handle emotionally before you want out?
4. Stopping SIPs When Markets Fall
This is one of the costliest mistakes. A SIP (Systematic Investment Plan) works on rupee cost averaging; you buy more units when prices are low and fewer when prices are high. A falling market is actually when a SIP works best.
Investors who stopped their SIPs during the March 2020 COVID crash missed the recovery entirely. The Nifty 50 bounced back nearly double within 12 – 18 months from the bottom. Those who stayed invested saw some of the best SIP returns of the decade.
Pausing a SIP because mutual funds are down is like stopping a grocery run because vegetables are on sale.
5. Holding Too Many Funds
More funds don’t mean more diversification. Holding 12 large-cap funds from different AMCs still gives you mostly the same 50–100 stocks. The overlap is massive, and you’re just paying more in expense ratios with no added benefit.
A practical portfolio for most investors looks like this:
- 1 large-cap index fund (Nifty 50 or Nifty 100)
- 1 mid-cap or flexi-cap fund
- 1 debt or hybrid fund for stability
Clean, low-cost, and diversified across market segments without unnecessary overlap.
6. Ignoring Costs
Mutual fund expense ratios in India range from 0.1% (index funds) to over 2% (actively managed regular plans). That gap compounds heavily over 10–15 years.
On a ₹10 lakh investment growing at 12% annually:
- At a 0.5% expense ratio – approx. ₹51.2 lakh after 15 years
- At a 2% expense ratio – approx. ₹41.8 lakh after 15 years
That’s nearly ₹9.4 lakh lost purely to charges. Direct plans carry lower expense ratios than regular plans. If you’re investing through a distributor’s app, check whether you’re in a direct or regular plan.
Also, redeeming before 1 year triggers an exit load of 1% in most equity schemes. LTCG tax of 12.5% applies on gains above ₹1.25 lakh per year. These aren’t huge on their own, but they hurt when you’re already exiting at a bad time.
7. Chasing Last Year’s Returns
Fund ranking lists are published every year. The best performers always attract massive inflows. But top performers rarely repeat, sectors rotate, and market leadership changes.
Picking a fund because it gave 60% last year without asking why it gave 60% is one of the fastest ways to land with a mutual fund loss. That return may have come from a specific sector boom that has already played out.
8. Not Researching the Fund
The S&P SPIVA India Report has some pretty sobering numbers: 73% of those big-name, actively managed funds for the large caps just can’t seem to outdo their benchmarks over the course of a decade. Honestly, it’s like flipping a coin – if you pick a fund at random, you’ve got nearly a 2 in 3 shot of picking one that underperforms an ordinary index fund
Before you hand over your hard-earned cash to some fund manager, you probably should check a few things first
- What’s the fund’s track record against its benchmark over the past 5 and 10 years? Any bragging rights or just a bunch of hype
- Has the fund manager shown up to work in the past year or two…or has someone new taken the reins?
- What’s the makeup of the top 10 holdings, and is the fund just socked away to a single sector?
- And how much churning has the fund endured over the past 10 years – any wild swings in the standard deviation department?
That’s it – a quick 15 minutes on a platform like Value Research or Morningstar can save you a whole lot more than that down the line.
Read Also: Mutual Fund Industry in India: Siz, Trends & Future Outlook
Why Are Mutual Funds Downright Now? Market Triggers Explained
| Market Event | Which Funds Are Affected |
|---|---|
| RBI rate hike | Debt funds see NAV drop; long-duration funds hit hardest |
| FII selling | Mid and small-cap funds fall more sharply than large caps |
| Global recession fears | All equity funds impacted; international funds especially |
| Rupee falls vs dollar | Domestic equity funds mildly affected; US funds gain |
| High inflation data | Rate hike expectations push bond prices down |
When you see mutual funds down across the board, it usually points to one of these triggers. These are macro events, and they pass.
How to Invest in Mutual Funds Through Pocketful
If you want to start investing in mutual funds the right way, Pocketful makes the entire process simple and structured. Here’s how you can get started:
Step 1: Create Your Account
The first step is to download the Pocketful app and sign up. The registration process is quick and takes only a few minutes.
- Enter your mobile number and verify with OTP
- Set your login credentials
- Access your personal dashboard
Step 2: Complete Your KYC
KYC is mandatory before you can invest in any mutual fund in India. On Pocketful, the entire KYC process is online and paperless.
- Add your PAN and Aadhaar details
- Enter your bank account information
- Complete the verification process
Step 3: Select a Mutual Fund
Once your account is ready, you can browse mutual funds based on your goal, risk appetite, and investment horizon. Pocketful lists funds across all major categories.
- Choose from equity, debt, hybrid, or index funds
- Filter by AMC, fund rating, or past performance
- Compare expense ratios before finalising
Step 4: Start Your SIP or Lump Sum Investment
Decide how you want to invest – through a monthly SIP or a one-time lump sum. SIPs can be started with as little as ₹100 per month.
- Set your SIP amount and date
- Choose the fund and confirm your investment
- Track your SIP performance directly from the dashboard
Pocketful gives you access to direct mutual fund plans with zero commission, so your expense ratio stays low and more of your money stays invested.
Read Also: How to Evaluate Mutual Fund Company Performance in India
Conclusion
The market dips, NAVs fall, and mutual fund down headlines start appearing; that’s always been part of investing in equities. But the investors who end up with a real, permanent mutual fund loss are usually those who reacted to the noise instead of sticking to a plan. Whether it’s wrong timing, mismatched funds, or ignoring costs, every mistake on this list is avoidable. Know why mutual funds are going down before you act on it. More often than not, the right move is to stay put.
Ready to start investing the smarter way? Invest in mutual funds with Pocketful, zero commission on mutual fund investing, so every rupee you put in works harder for you.
Frequently Asked Questions (FAQs)
Why are mutual funds going down recently?
Mutual funds usually take a hit when stock markets start to plummet. Its been pretty obvious that things like the cost of living going up, the state of the world getting more uncertain, the central banks raising interest rates, and foreign investors cashing out can all have an impact on how well your fund is performing.
Why are all mutual funds going down today?
If the overall market declines sharply, many equity mutual funds may fall together. This happens because most funds are connected to market performance directly or indirectly.
Is mutual fund loss permanent?
Not always. Many losses are temporary and depend on market conditions. A loss becomes permanent only when investors sell their units at a lower price.
Should I stop my SIP when mutual funds are down?
Stopping SIPs during market corrections may not be a good decision for long-term investors. Continuing SIPs can help average the purchase cost over time.
How can I reduce mutual fund loss?
You can help reduce the risk byNot panicking and just looking to long term gainsSpreading your portfolio out so its not all in one placeChoosing the right funds for your level of riskNot making any rash decisions during the really volatile times
Are Mutual Funds Safe for Beginners?
Mutual Funds can be a pretty good starting point for beginners if they pick funds that are based on their own financial goals and risk tolerance. A lot of new investors start off with large-cap or hybrid funds because they tend not to be too unpredictable
