Introduction
When is the right time to invest in mutual funds? That is a tricky question and an apt one. Given the stock markets volatile behaviour, it does not matter when is the right time to invest in the market. But what’s for sure is that if you wait for the right time to invest in mutual funds, you could end up sitting out the market.
So then, when is the right time?
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The right time, of course, is when the market hits rock bottom. In its purest form, it’s called timing the market and is almost impossible to do. Here’s why.
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You need to be thoroughly sure that the stock market has touched an all-time low. Besides, if the world is falling apart and markets are sinking, how many investors will have the capital to think ahead and invest in the market? Consider the Global Financial Crisis of 2008 or the freefall of global markets in March 2020. In both situations, several investors exited in panic and incurred a loss on their initial investment.
Very few investors have the resilience and determination to invest during a market low. That’s because it takes a lot of patience to ride it out. But with the ups and downs of the market, one can never say when is the right time to invest in mutual funds. No investor or financial expert can successfully call out rock-bottom or a high peak in advance.
And since there is no sure way any individual could accurately determine market highs and lows, adopting an investment strategy regardless of market conditions should be ideal for investing in an MF. Also, rather than looking for the right time to invest in mutual funds, why not look into the right way to invest.
SIP: The Right Way To Invest
A Systematic Investment Plan or SIP with a highly reputed brokerage firm such as ICICI Direct is the best way to invest in equity mutual funds over the long term. There are many reasons why SIPs are suitable approaches to investing in mutual funds. With a SIP, you get the flexibility of choosing a fixed amount you want to invest in the top mutual funds of your choice at periodic intervals. You can select a monthly, quarterly, biannual or annual period to invest in an MF through SIP. Most mutual funds provide you with the option of starting with as little as ₹500 per month to invest in their schemes.
The Benefit Of Rupee Cost Averaging
SIPs are a preferred investment mode of investing in mutual funds because of their excellent advantage of rupee cost averaging. Since the market does not move linearly, your systematic investment strategy will help you utilise market changes. Your SIP can help you navigate through the market’s erratic movements. As you continue investing a fixed amount through SIP in the fund, you benefit from obtaining more fund units when the markets and the NAV are low and fewer units when they are high.
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An important point to remember about mutual funds is that it is an anytime investment. You do not need to wait for an opportune moment or time to begin investing. That being said, when planning your MF investments:
- Stick to your SIPs across market highs and lows.
- Consider the long-term performance of an MF scheme before investing
- Diversify across categories and sectors
- Stagger your investments appropriately through Systematic Transfer Plans [STPs].
- Do not attempt to time the market
- Pick the right MF schemes based on your investment profile
The Issue With Timing The Market
To answer the topical question NOW is the right time to invest in mutual funds. Whether markets have fallen considerably or risen exponentially at reading this article, you need to begin your mutual fund investment journey today.
Investing for the long run in top mutual funds can give you the ability to generate exceptional returns if you stay committed and invested through your investment tenure.
Conclusion
To avoid the worry of timing your investments, begin a SIP in the mutual fund of your choice with ICICI Direct. Having taken into consideration your risk appetite, objectives and investment horizon, plan your SIPs and start building wealth for your future today.
Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.Please note, Mutual Fund related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.
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