The year 2018 was when we all learnt some hard money lessons. We learnt that stock prices that go up very fast can zoom down too. We learnt that debt funds are not fixed deposits and returns are not assured. We learnt that real estate revivals can take years and years, and 2018 was not that year. We learnt that governments can change the rules of the game around taxation making it better or worse for you. 2018 was the year in which we learnt the meaning of risk.

There were four kinds of risks that we took home this year. First, the risk of chasing high returns. Many of you may be holding a portfolio that has mostly small- and mid-cap funds. That’s because you saw the 40% plus one year returns in 2017 and went all out to harvest that return. I can remember plenty of conversations with first-time mutual fund investors who had jumped right into the deep end with all their money in the risky part of the market. Warnings would fall on deaf years as the return chasers thought the SIP was their safety belt. 2018 saw a bloodbath in both the mid- and small-cap categories. Investors are staring at an average loss of 12% in mid-caps and around 18% in small-caps. The worst small-cap funds have lost almost a third of the invested value—or 1 lakh has become 70,000. If you had your entire money in small- and mid-caps, your portfolio is bleeding. But if you had a mix of large-cap, multi-cap and ELSS funds, the red will be less stark. Just buying last year’s winner is not a good strategy for mutual fund investors. 2018 told us that. Understand what a ‘diversified portfolio’ means and implement it in your money box.

Second, the risk of believing debt funds are FDs. Mutual funds that invest in government and corporate bonds, or debt funds, are a good alternative to bank deposits in terms of returns, liquidity and flexibility, but they come with risk. That risk came home in 2018 with the average return from a very safe category like conservative hybrid (funds that invest up to 25% in equity and the bulk in bonds) was just 1.70%. Mutual funds that were sold as a guaranteed dividend paying option were in trouble along with income-seeking investors who had believed the hard sell.

Third, the risk of delayed real estate revivals. 2018 was the year in which the flat owners in the ghost towns of greater Noida, and other places in the country, realised that real estate investments have risk and are not the sure-shot investments they have been made out to be. It was a year in which some investors began evaluating real estate as just another asset that needs to justify the price it is being sold at. It is the year in which yields from real estate (total rent in a year divided by market value of property) began to be seen before an investment was considered. It is the year in which the cost of the loan began to be a thing to be added to the cost of real estate.

Fourth, the risk of government taxation and illogic. Equity investors got a rude shock with the 10% long-term capital gains tax that came into effect from 1 April 2018. Mutual fund equity investors felt cheated because other vehicles like NPS and Ulips did not get impacted and continue to enjoy a zero capital gains status on their equity investments. The risk of illogical government action came home to equity mutual fund investors this year. But it did not seem to impact the decision to keep investing in equity funds as the SIP book grew from 6,690 crore a month to almost 8,000 crore a month, April to November 2018.

The risk to our money in 2018 led to money lessons learnt. The biggest takeaway is this: there are years in which even safe assets do badly. You can respond by rushing back to the safety of bank fixed deposits and gold, or learn to negotiate the bad year and stay with a portfolio of funds. Keep return expectations reasonable, understand that mutual funds carry risk and diversify your money across different kinds of funds—of 2018 taught us this, it was a good year for understating risk.

Monika Halan is consulting editor at Mint and writes on household finance, policy and regulation