One day, your portfolio looks healthy. Next, it dipped unexpectedly. If you’ve logged into your mutual fund dashboard and noticed red arrows or falling NAVs, you’re not alone. Market volatility can feel unnerving, especially when you’re investing for long-term goals like your child’s education, future, or financial security.
The truth is: mutual funds do go down, and not just occasionally. Market corrections, economic shifts, global news, or domestic policies can all cause fluctuations. But here’s the key — dips are a normal part of the journey, not a derailment.
Let’s break down why mutual funds are going down, what it means for your investments, and most importantly, what you should (and shouldn’t) do in such a scenario.
Why Mutual Fund Markets go down — And what triggers it
Mutual funds are tied to the performance of the market. When markets fall, mutual fund NAVs fall too. But what exactly brings the market down?
Understanding this helps you stay calm when things look bleak. Here’s what usually drives a fall:
- Economic Slowdown or Recession Fears
Weak GDP growth, rising inflation, or poor corporate earnings can all signal that the economy is slowing down. This affects investor sentiment and causes market-wide sell-offs, leading to mutual fund NAVs falling. - Geopolitical or Global Events
Wars, pandemics, oil price hikes, or US Fed interest rate changes — all these events can create ripple effects across global markets. When foreign investors pull out money from Indian markets, mutual funds take a hit too. - Domestic Policy Changes or Political Uncertainty
Sometimes, a new government regulation or election uncertainty can trigger fears in the market. For example, changes in tax policies or capital gains laws can spook both foreign and domestic investors. - Sector-Specific Corrections
If you’re invested in sectoral funds (like technology or pharma), a correction in that industry will reflect immediately. This might look like your mutual fund is falling, even if the broader market is steady. - Overheated Markets Undergoing Corrections
After a long bull run, the market naturally corrects itself. This is a healthy sign, not a disaster — it simply means prices are adjusting to more reasonable levels.
These triggers may sound alarming, but they’re common and often temporary. If you’re investing for your child’s long-term goals — say 10–15 years — these dips can work in your favour.
What should you do when the Mutual Fund market is down?
Watching your investments fall is emotionally taxing, especially when you’re saving for your child’s future. But reacting impulsively can do more harm than good.
So, what should you do?
- Don’t Panic and Exit Immediately
One of the biggest mistakes investors make is exiting during a dip. Mutual funds are long-term instruments. Selling during a low means you’re locking in losses, not avoiding them. Historically, markets bounce back stronger after corrections. - Review Your Investment Goals and Time Horizon
If you’re investing for your child’s higher education 10 years from now, today’s fall is just a bump on the road. Reassess whether your goals have changed. If not, stay invested. - Continue SIPs Without Interruption
SIPs (Systematic Investment Plans) work best when you stay disciplined. In fact, investing during a downturn gets you more units for the same amount. This is called rupee cost averaging, and it works wonders over time. - Avoid Checking Your Portfolio Too Frequently
Constant monitoring increases anxiety. Unless you need the money urgently (which you ideally shouldn’t with goal-based investing), avoid logging in every day.
Think of it this way: if you’re saving up for your daughter’s college fund 12 years away, today’s 5% dip is irrelevant in the grand scheme. Stay the course.
Why you should still stay invested in Mutual Funds
Market dips test your patience, but they also offer a reality check: Are you investing with emotion or strategy?
Remaining invested matters because:
- Markets Rebound — Historically Consistent
From the 2008 financial crisis to the COVID-19 crash, Indian markets have consistently recovered. Mutual funds, tracking market trends, have typically followed suit. - Compounding Rewards Patience
Mutual funds thrive over time, not overnight. The longer you stay invested, the better the compounding effect, especially if you’re planning your child’s financial future. - Falling NAV = Opportunity to Accumulate More Units
Think of it like a stock clearance sale. When NAVs fall, your SIP buys more units. These add up and grow significantly when the market rebounds.
Can you lose money in Mutual Funds? What to do if it happens
Yes, mutual funds can result in a notional or even actual loss, but it depends on when you withdraw and how you invested.
Here’s what you should know (and do):
- Don’t Book a Loss Unless It’s Urgent
Losses are only realised when you sell. If you don’t need the funds right now — say for your child’s school admission — then don’t redeem. - Rebalance Instead of Reacting
Suppose you had invested 60% in equity and 40% in debt for your child’s 10-year fund. If equity has taken a hit, consider rebalancing — moving some gains from debt back into equity to average out the cost. - Use Diversification to Soften the Fall
Don’t put all your money into one type of fund. A combination of large-cap, mid-cap, hybrid, and debt funds ensures that if one category falls, the others may cushion the blow. - Take Advice — But From the Right People
Family WhatsApp groups or unverified YouTube “tips” are risky. Consider consulting a SEBI-registered advisor if you’re unsure about what to do.
How to manage your portfolio when Mutual Funds are falling
It’s not about avoiding losses altogether, but managing them smartly. Here’s how you can handle your portfolio in a down market:
- Check Asset Allocation, Not Just NAVs
Your asset mix should align with your goal and time frame. If you’re 3 years away from using the funds, shift some money from equity to debt to protect capital. - Top-Up During Corrections (If Comfortable)
If your financial situation allows, invest more when markets are low. It’s like buying quality assets at a discount — especially effective for long-term goals like your child’s future. - Avoid Knee-Jerk Reactions Based on Headlines
News tends to amplify fear. Reacting to every negative headline will lead to frequent portfolio changes and instability. - Keep an Emergency Fund Separate
If you’re investing for your child’s future, don’t mix those investments with emergency funds. This reduces the temptation to pull out money during dips.
A falling market isn’t always bad news — it’s often a disguised opportunity.
Mistakes to avoid in a declining market
Managing emotions is half the battle in investing. Here’s what not to do:
- Don’t Stop SIPs Midway: Many investors pause their SIPs during downturns, which breaks the very strategy that protects them.
- Avoid Switching Funds Impulsively: Jumping from one fund to another based on 6-month returns is like changing schools every time your child struggles in one subject.
- Don’t Compare Past Performance Blindly: Past returns don’t guarantee future results. Focus on consistency and long-term fund behaviour.
- Stay Off DIY Experiments in Panic Mode: Avoid switching from equity to gold to debt just because the market is red. Stick to your plan — especially if it’s tied to your child’s future.
Why Mutual Funds are going down in India
If you’re wondering why mutual funds are going down in India, let’s look at what’s happening beneath the surface — and why it’s not all doom and gloom.
- Global Economic Uncertainty
U.S. Federal Reserve rate hikes, global growth concerns, and volatile oil prices have reduced FII inflows to Indian markets. Lower inflows weaken market momentum, causing mutual fund NAVs to decline. - Overheated Mid- and Small-Cap Segments
A Morningstar India report (May 2025) highlights that small- and mid-cap fund valuations had exceeded historical averages, signaling overvaluation. This triggered a necessary correction, which is currently ongoing, driven by market volatility and investor profit-booking. - Profit-Booking by Institutional Investors
Following the 2023–2024 market rally, institutional investors have engaged in profit-taking, selling off holdings. This increased selling pressure has led to short-term declines in mutual fund NAVs. - Regulatory Shifts and SEBI Guidelines
While aimed at investor safety, some SEBI changes temporarily unsettle markets. For instance, reclassification of certain fund categories can lead to fund managers reshuffling portfolios.
But here’s the good news: India’s long-term growth story remains intact. Mutual funds remain one of the most regulated and diversified ways to invest for your child’s future, especially compared to direct stocks or speculative assets.
Conclusion
Market dips are temporary. But the future you’re building — especially for your child — is not. When you invest with a clear purpose and long-term goal, short-term volatility is just noise.
Invest with Toddl, a platform to help you save and invest on behalf of your child. And with discipline, patience, and strategy, overcome panic.
Start your journey today with a calm mind and a clear plan; your child’s dreams deserve more than short-term fear.
FAQs
1. Why are my mutual funds showing a loss even though I’ve been investing for a while?
Mutual fund NAVs fluctuate based on market performance. If the overall market or the sector your fund is invested in goes through a correction or downturn, your portfolio value may temporarily show a loss. This is common and often not permanent — especially if you’re investing for long-term goals like your child’s future.
2. Should I stop my SIPs when mutual funds are down?
No. Continuing SIPs during market downturns is beneficial. You end up buying more units at lower prices, which helps reduce your average cost over time. This is called rupee cost averaging, and it’s especially useful for long-term investments like your child’s education or marriage.
3. Will mutual funds crash like the stock market?
While mutual funds can fall during a market crash, they are not as risky as investing directly in stocks. That’s because mutual funds are diversified — they spread your investment across many companies and sectors. So while there may be short-term dips, total collapse is highly unlikely with well-chosen and diversified funds.
4. Can I switch my mutual funds when the market is falling?
Switching should be done based on goals and asset allocation, not fear. If your financial objective or timeline hasn’t changed — especially for goals like your child’s future — then switching during a dip may do more harm than good. Consult an advisor before making changes.
5. How long should I wait before my mutual fund recovers?
There’s no fixed timeline, as recovery depends on the extent of the downturn and market cycles. However, Indian equity markets historically recover within a few months to a few years. If you’re investing with a 5–15 year horizon for your child, temporary losses should not concern you.
Disclaimer: Mutual fund investments are subject to market risk. Please read all the scheme-related documents carefully before investing.The examples in this article are purely for educational purposes and do not constitute a recommendation or advisory. Investors are expected to contact a certified distributor/advisor for planning and investment.
