_*Should You Stop Your Mid-cap & Small-cap Fund SIP?*_ Every year, between Nov and Dec, we bring you India's most trusted mutual fund recommendation series at Finology. In our Best Small-Cap Mutual Fund for 2024 video, released on 1 Dec 2023, we made a bold decision. *We did not recommend any new investments in small-cap funds.* Why? Because valuations were too high, and the risk-to-return ratio wasn't favourable. Yet, between December 2023 and November 2024, the Nifty Small cap 250 index surged ~26%. At that point, it felt like valuations were being pushed to the moon, far beyond what fundamentals could justify. Many questioned our decision, but my research team and I spent 500+ hours analysing economic factors and held countless discussions to assess market conditions. By November 2024, the valuation bubble was clear: ✅ 36+ mid-cap companies (out of 150) were trading at a PE above 70 ✅ 14+ companies had a PE exceeding 100 Despite the rally, we stood firm in our belief that an economic slowdown could trigger a deep correction. On 23 November 2024, in our 2025 Mutual Fund Recommendation video, we again skipped small-cap and mid-cap fund recommendations, sticking to research, not momentum. But this time, the reaction was intense ❌ 100+ comments criticising our decision ❌ People felt their time was wasted ❌ We lost subscribers Today, the market reality is drastically different, something many never saw coming. Q3 results showed only ~7% (single-digit) earnings growth, which does not justify the high valuations. •Nifty Small cap 250 index has dropped 20% in 2025, with 10% of that in just the past week. •Nifty Midcap 150 index is down 15% this year, slipping 7% in just one week. *Result:* Small-cap SIP investors have been sitting on unrealised losses (a negative XIRR of up to - 46%) in all 29 schemes since their peak in September 2024. At Finology, we walk with the mindset of Capital Safety No Hype No FOMO No chasing short-term trends. Markets can be irrational for a while, but in the end, fundamentals always catch up. First, ask yourself: •Should I stop my SIPs to avoid further losses? •Will small caps recover soon, or is this the start of a prolonged downturn? •Should I arrange more money for a lump sum investment in small caps? If these questions are taking your headspace, then you should probably never consider small-cap or mid-cap funds in your asset allocation. But if that's NOT you, here are my key takeaways: 📌 Redefining small cap long-term investing horizon – If you're not ready for a 15+ year horizon, small caps aren't for you. 📌 Small caps are highly volatile – They can swing sharply within the same year, sometimes wiping out 50% of gains in deep corrections. 📌 Sharp declines are common – Even in positive years, small caps have seen significant drawdowns. 📌 Review your asset allocation – If small caps exceed 25% of your portfolio, rebalance. An optimal allocation is 15-20% to manage risk. 📌 SIPs thrive in volatility – Staying invested lets you buy at lower prices, improving long-term cost averaging. If you value our capital safety mindset, long-term, research-backed stock picks, and sector-agnostic approach, explore *Finology 30—your curated path to building wealth the right way.*👇 Link: [https://recipe.finology.in/stocks]