Looking to Redeem During Market Highs? how much damage can it do to you

Investors who took the opportunity to invest during the low have got tremendous returns to capitalize on the same when the market is high. However, the point to note here is that if they had kept the investment, the profit would have been even higher.

Let us understand this with some examples.

Quant Small Cap Fund and Kotak Small Cap Fund were the top gainers during this market rally. Now as on 27th March 2020, when Sensex was at 25,981, the NAV for Quant Small Cap and Kotak Small Cap Fund was ₹30.15, ₹50.07 respectively.

Now when the Sensex reached 40,509 on 9th October 2020, the NAV of Quant Small Cap was ₹62.05, and the NAV for Kotak Small Cap Fund was ₹88.23. So if an investor had invested ₹1 lakh on each fund as on 27th March 2020, the corpus will become ₹2.05 lakh more ₹1.76 lakhs.

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Similarly on 5th February 2021 the Sensex reached 50,731 and the NAV of Quant Small Cap was ₹76.35, and for Kotak Small Cap Fund, the NAV was ₹119.82. so the investment will increase ₹2.53 lakh more ₹2.39 lakhs respectively.

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And, as the Sensex hit 60,048 on September 24, the NAV of Quant Small Cap was ₹132.26, and the NAV of Kotak Small Cap Fund was ₹177.94. Funds for both investments will become ₹4.38 lakh more ₹3.55.

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So in this way, if the investor had redeemed the quant small cap investment on 9 October 2020 when the Sensex would have reached 40K instead of 24 September 2021, he would have lost ₹2.33 lakh and so on, for his investment in Kotak Small Cap Fund, he would have incurred a loss ₹1.79 lakhs.

Therefore, instead of trying to time the markets and capitalize on their investments during market highs, investors should sell units when they need money or when the investor is closer to their financial goal.