(Last Updated: November 20, 2018)
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What happens to your Mutual Funds when there is a market meltdown

  • Last few years has been great going for stock markets in India, we have seen a secular bull run and probably one of the strongest bull runs in the history of the stock market. Consequently, mutual funds also had a gala time with most of them clocking great returns for their investors.

    But let’s say tomorrow there is a market meltdown what will happen to the markets , so I thought let me see what happened in past and it can help us understand what might happen in future.

    Here is the Nifty plot between Jan 2008- Mar2009

    So here is the simple methodology I followed to see who mutual funds behaved during this time period. I picked up 2 funds who have consistently performed in last 10 years and tried to look at their journey during the downturn and post that and how it compared with that of wider market. The funds i picked up are

    SBI Bluechip Fund –> Large cap
    Franklin India Smaller companies fund –> Mid/Small Cap

    Here are the Results

    How SBI Bluechip performed during the period


    0_1535943361063_sbi annual return.png

    As you can see clearly SBI blue-chipped mirrored larger market as proxied by S&P BSE 100 during the mayhem of 2008 and 2009, but as the market bounced back it out-performed the market and since 2011 has consistently outperformed the market.

    How Franklin Templeton performed during this period

    0_1535943436117_ft annual.png

    If you see again Franklin Templeton performed almost similar in the way SBI bluechip, though volatility was little high being a small cap.

    So here is the summary

    • Mutual funds follow the wider market in terms of down trends and upturns
    • Good Mutual funds try to perform slightly less worse in down-turn and slightly better in upturns, though it doesn’t always happen
    • Mutual funds are subject to same risks as wider market and class of stocks they represent
    • Important thing to look at is how they bounce back .

  • @jatinderchd

    Re: What happens to your Mutual Funds when there is a market meltdown

    Nice Article Jatin.
    Market is going through same turmoil at this point of time.
    A pragmatic approach is a necessity to survive as well as succeed.

    But I have not covered many things , can we give our readers something more on this front. Open for your ideas and suggestions.

  • People start worrying about their mutual funds when there is a meltdown in the market. It can be seen from the graphs that there is just a minor loss. But, it can recovered later when the stocks go up. So, people might be able to worry less when they stay calm and look forward to long term investing.

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