Best time to Invest in the mutual funds

Table of Contents

Introduction

Best time to invest in the mutual funds starts from Just few years into work life, an individual starts thinking about his future goals which are aligned with his financial goals. Since, it is not really possible to achieve all financial goals with just the salary that an individual earns especially in the starting years; he starts thinking about investing his money the right way. In the recent times, mutual funds are the most preferred investment option.  

But then there is one question that most of the people think before diving into the investment business.

What are Mutual funds?

 

Mutual fund houses basically pool money from different investors and then allot them their shares in different asset classes as per the scheme chosen by them. Due to its investment in various asset classes, it gives better results than just investing in stocks, which is the age old method of investing.  

Mutual fund is a combination of asset classes such as equity, debt, balanced funds and allocation to these classes is made in accordance with the goals of the investor. Since a lot of money is involved, a professional fund manager manages it and made the decision of buying or selling units so that you can reach your desired financial goal.  

Since it has been gaining quite a lot of popularity among the investing population, most of the novice investors have this query that when to actually invest in mutual funds. While there is no such thing as a good time, however, one can make the investment strategically in order to make the best out of your investments. For instance, one should always enter or invest in mutual funds when the prices are little lower so that they’ll have to pay a little less.

instances where one can consider investing in mutual funds right away: 

Market is down. 

Bonds are giving great returns. 

Real estate business is not doing well.  

Apart from these instances, there are certain factors too that can help one decide as to when they should invest in mutual funds. That can be done by knowing which type of fund you want to invest in. If you come by a fund that matches your investment goals, you can straightaway start investing.

Factors to Consider while invest in Mutual Funds 

Risk taking capability:

Different investors have different risk taking capability as well as inclination towards taking risks. If you are an investor who isn’t much interested in taking risks, then you can go for debt or balanced funds which provide you good returns with fewer risks. However, for those who wish to maximize their gains, can opt for equity funds as it aims to provide better returns than anyone else in the long run.  

Market situation:

Some investors are fine with entering the market when they are ready while some wait for the market to be ready and then invest in it. It totally depends on the risk an investor is willing to take with regards to investment.  

Returns on Investment:

This is of major importance to all the investors for this is the reason why they are into investment business. Those who are aiming for higher returns can opt for equity funds via SIP as it provides quite a good inflation adjusted return in the long run. 

Tax deductions:

Quite a number of mutual fund schemes provide certain amount of deductions under section 80C of income tax act. Before heading towards investment, one must compare these schemes and opt for the one that gives them maximum deduction such as ELSS.  

Tenure:

This basically decides as to what type of funds you are going to invest in. If you are in for the long haul, you can easily invest in equity funds for they provide the best inflation adjusted returns. However, in case of being in investment for the short run, you can choose a balanced fund to earn good returns.  

So, taking these factors into consideration,

what would be the best way to invest in mutual funds? 

Well, there are quite many ways to enter into mutual fund investment. With the increasing inclination of indian population towards mutual funds which has resulted in almost 37% growth of this industry as compared to last financial year, this has proven to be one of the best ways to invest money in order to achieve one’s financial goals. 

SIP or systematic investment plan is a good option while opting for mutual fund investment. One can start his investment with amount as low as Rs. 500 and select the minimum investment that he would like to make on a regular basis. Not only is this process systematized, one can easily gain amazing inflation adjusted returns in the long haul.  

The reason as to why SIP is a good option is that it uses the power of compounding to reinvest the already invested money. Also, the fund managers tend to buy lesser units when NAV is high and more when NAV is less, thus averaging out the total cost which only brings in profits in the long run.  

Timing the market before making investment is not always a wise thing to do. This is so because one cannot always make the right guess, however, one can always start investing just when he feels he is ready to put some money away from his income towards investment. However, no matter at what time one starts investing, doing it the right way is what matters in the long run. 

 So, as far as mutual funds is considered, one must not think about the time factor rather just their financial goals, tenure they have in mind for investment and their risk taking capacity before investing.