Mutual fund investments especially in equity reap its benefit if held over the long term. When investors want to achieve some of their long term goals, they prefer exposure into equity investments over other asset classes due to its high yielding nature. However, investing in equity is not an absolute method of getting high returns in the long term always. Sometimes equity investments in mutual funds can witness knee jerk due to multiple factors such as inefficient fund management, fluctuations in the market or even a financial/pandemic crash (similar to Global Financial crisis and COVID 19). Due to this if long term returns on mutual funds or SIP investments are showing negative returns, an investor needs to adhere to the below points.

Keep calm and avoid hasty decisions: If long term returns are negative due to market volatility or pandemic events, do not panic instead be a resilient investor. Selling of existing investments and buying into new funds or stopping investments is not advisable since it may harm long term return potential of portfolios. Investors should keep in mind their short-term needs, regular income and asset allocation principle.

Compare performance of existing investments and rebalance if needed: Some mutual fund schemes may be more volatile than other categories of funds. In this regard, higher volatility usually offers greater returns but comes with more risks. By reviewing across different asset class category performances one can identify the best investment alternatives that suit the risk profile of an investor and then can rebalance the portfolio, if required.

Diversify your investment strategy: It is never a good idea to keep all your eggs in the same basket because this considerably increases the risks during any emergency. Diversification across asset classes and multiple asset categories moderate risk and stability in the mutual fund portfolio. Such a strategy can also help an investor to achieve short term goals, without relying on single asset class only.
For example: Many investors choose to invest around 5-10% of their portfolio in gold as it acts as a hedge against inflation and tends to perform well when the market undergoes any crash or volatility.

Ensure that one works with a certified financial planner or wealth management firm to make the right decisions, without disturbing the intricate balance of an existing portfolio.