Mutual Fund Returns Turn Negative; Will Investor Patience Die Out?

The 1, 2 and 3 year returns for almost all of the largecap funds have turned negative. Until two months back, all of these returns were positive, when there were hardly any infections through the coronavirus outbreak.

For those who have been investing over the last 1 2 and 3 years, where SIPs really caught up, the returns would come as a shock.

Many are arguing against encashing mutual fund investments, but, the reality is nobody knows when the coronavirus infections will abate. The International Monetary Fund Chief has said that the world has entered into a global recession, while others believe it is likely in the next few months. The worry for the mutual fund industry is that if the lockdown persists, we might see inflows into mutual funds, particularly from SIPs dwindling. Nobody can predict the future and the coronavirus is a "big unknown".

If you desperately need money, it's best to encash, but, otherwise it is prudent to stay invested, as you would have to encash with big losses. In any case, let's see returns of some of the largecap mutual funds over the last 1, 2 and 3 years. We are taking only the largecap funds, with assets under management of more than Rs 10,000 crores.

All of the below are annualized returns

Name	1- year returns	2-year returns	3-year returns
ICICI Prudential Bluechip Fund - Direct Plan - Growth	-23.33%	-9.02%	-1.03%
SBI Bluechip Fund - Growth	-22.73%	-10.75%	-3.38%
HDFC Top 100 Fund - Growth	-30.99%	-11.31%	-4.77%
Nippon India Large Cap Fund - Growth	-30.64%	-12.17%	-4.20%
Axis Bluechip Fund -Growth	-5.71%	3.02%	8.38%
Mirae Asset Largecap Fund	-22.63%	-7.09%	-0.91%

What should investors do now?

If you go by returns for other funds like those of small cap and midcap, the returns are even worse. For investors who have the patience, it would be prudent not to encash now. Would there be a possibility of the returns getting worse over the next few weeks? It is highly possible. However, if you are willing to wait for 2-3 years period, you might end-up making superlative returns.

If you are in dire need for money, you might want to encash your investments, however, you might otherwise want to just hang on.

At the moment, it is very difficult to say, when the infections through the covid-19 would abate. Mutual fund investors would need to show patience as well as maturity. As with all things, the coronavirus too may come to pass.