What is the right time to invest in mutual funds? All you need to know

by Nitin

Inflation beating returns and attractive long-term gains have made mutual funds immensely popular among investors. Due to available of multiple fund categories that meet the risk profiles of different investors, mutual funds are now a widely accepted financial instrument to earn returns on your money.

Investors are now more curious about investing in the right mutual fund at the right time.

However, there is no best time to invest in a mutual fund. You can invest at any point in time to watch your money grow slowly. However, it is always advisable to start investing in a fund with a lower NAV. It will help you to maximize your returns and also lead to a higher wealth accumulation.

Consider these market scenarios before investing in a mutual fund.

  • Breakdown of the realty market
  • Equity markets have hit rock bottom
  • Bond yields are at a high

However, the above mentioned scenarios are ideal in nature. It is highly unlikely that you would see all of this happening at the same time. And it is almost impossible to know such a timeline. Hence, if you have the money to invest then it is best to find a good mutual fund and start investing.

New to investing in mutual funds?

It is a good idea to invest in mutual funds. However, if you are new to investing in market-linked financial instruments then it is better to tread slowly. You can begin with SIPs (systematic investment plans) that you can initiate, puse, redeem, and continue at any point in time. Some SIPs, come with a lock-in period of 2-3 years' Hence, do check on that if you think you would need to liquidate the fund in the near future.

You can simply link your bank account with SIP and the amount will get debited on the allocated day of the month to go into the mutual fund. In the SIP model, fund managers normally buy more at lower NAVs and less at higher NAVs to maximize returns and to reduce average cost per-unit. It is also known as Rupee Cost Averaging.

For long term investors, SIP is a great tool to invest small and create long-term wealth.