What Should I Do When My Equity Fund Drops During a Market Downturn?

What you’re experiencing is one of the most important lessons in equity investing:
An equity fund can go down even when you’ve made a profit.
If your investment grew from, say, ₦100,000 to ₦112,000 and is now at ₦108,000, you have not lost capital yet. What you’ve lost is part of your unrealized gain. There is a psychological difference between:
Losing profit, and
Losing principal (your original capital).
The key question is not, “Should I move to a Money Market Fund (MMF) now?”
The key question is, “Why did I invest in the equity fund in the first place?”
If your goal is long-term wealth (3–10+ years)
Market declines are normal.
Equity funds invest in stocks, and stocks do not move in a straight line. There will be:
Profit-taking periods
Market corrections
Economic uncertainty
Earnings disappointments
If your investment horizon is several years, a temporary decline is often the price paid for potentially higher long-term returns.
If your goal is short-term capital preservation
Then an equity fund may not have been the right vehicle to begin with.
Money Market Funds are designed for:
Stability
Liquidity
Lower volatility
But they generally offer lower long-term growth than equities.
The danger of moving now
Many investors make this mistake:
Equity fund rises.
Market falls.
Investor panics and sells.
Money moves to MMF.
Market recovers.
Investor buys back at a higher price.
They effectively sell low and buy high.
A framework for deciding
Ask yourself:
1. Do I need this money within the next 12 months?
Yes → Consider reducing equity exposure.
No → Staying invested may make sense.
2. Has the reason I invested changed?
If not, a falling market alone is usually not a sufficient reason to exit.
3. Am I uncomfortable because of the volatility, or because I genuinely need the money?
These are different issues.
What many disciplined investors do
Instead of moving everything to MMF, they:
Keep an emergency fund in MMF.
Continue regular contributions to equity funds.
Use downturns to accumulate more units at lower prices.
This is often called averaging or buying through the cycle.
For your specific situation
Based on our previous discussions, you are still relatively new to investing and are building wealth gradually. In your case, I would be cautious about making large allocation changes solely because the market has pulled back.
Before moving money, ask:
What percentage of your total savings is in the equity fund?
How long have you been invested?
Is this money earmarked for school fees, business capital, or another near-term need?
If the money is not needed soon, a decline by itself is usually not evidence that you’ve made a mistake. Sometimes the hardest part of equity investing is sitting through the periods when the market tests your conviction.