War Clouds and Wealth: Mutual Fund Strategies for Uncertain Times
By Akhil Chugh
Date May 04, 2025
When geopolitical tensions rise—like the recent skirmishes and growing unease along the India-Pakistan border—it’s natural for investors to feel anxious. Markets react swiftly, headlines scream panic, and many wonder:
“Should I stop my SIPs or pull out of mutual funds altogether?”
The short answer? Absolutely not.
Let’s break down why staying invested and continuing your SIPs during uncertain times could be the smartest financial decision you make.
Data Speaks: Markets Hate Uncertainty, but Recover from It
History has repeatedly shown that while geopolitical events can cause short-term volatility, they rarely alter the long-term trajectory of economic growth.
Consider these examples:
- Kargil War (1999): The Sensex initially dropped 12%, but recovered within months and went on a multi-year bull run.
- Pulwama Attack & Balakot Strike (2019): Markets fell briefly, but rebounded quickly, ending the year with positive returns.
This shows that wars and conflicts may shake the market, but they do not break it. Investors who stayed invested came out ahead. Those who exited missed the rebound.
The Power of Rupee Cost Averaging:
SIPs (Systematic Investment Plans) are able to navigate volatility through a concept called rupee cost averaging.
Rupee cost averaging allows investors to purchase more units when prices are low and fewer units when prices are high. This strategy can lead to a lower average cost per unit over time.
Let’s illustrate this with a hypothetical example:
Monthly Investment: ₹20,000
Investment Period: January 2024 – December 2024
By continuing SIPs during market downturns, the investor accumulates more units at lower prices, reducing the average cost per unit and positioning the portfolio for greater gains when the market recovers.
This only works if you keep investing even during market dips.
Stopping SIPs during uncertain times breaks this compounding engine. So, staying invested is crucial for creating long-term wealth.
Managing Emotions During Market Uncertainty:
Geopolitical tensions can evoke strong emotional responses, leading investors to consider halting investments or withdrawing funds. However, such actions can be detrimental:
- Market Timing Challenges: Predicting market movements is inherently difficult, and attempting to time exits and re-entries can result in missed opportunities.
- Missed Rebounds: Markets often rebound swiftly after downturns. Exiting during a dip may lead to missing the recovery phase.
- Disrupted Compounding: Interrupting SIPs breaks the compounding cycle, potentially impacting long-term wealth accumulation.
Maintaining discipline and focusing on long-term goals is essential during volatile periods.
Conclusion: Stay the Course for Long-Term Wealth
War clouds may loom, but your wealth journey doesn’t need to be clouded by fear. While geopolitical events like the current India-Pakistan tensions can cause short-term market fluctuations, history demonstrates that markets recover and grow over time. Continuing SIPs and staying invested during such periods can enhance long-term returns through rupee cost averaging and the power of compounding.
At Net Brokers, we encourage you to remain focused on your financial goals and avoid reactive decisions based on short-term events.
If you have concerns or need to discuss your investment strategy, please reach out to us.
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Stay Calm. Stay Invested!