2022 has been a difficult year for the markets. High inflation and bearish sentiments have left many investors confused about whether it is a good time to invest in market-based products like stocks and mutual funds. While the opinions may differ for stocks, when it comes to mutual funds most experts agree that no time is a bad time for investing in these instruments.  

“In 2022 it’s as good a time as ever to invest in Mutual funds and participate in the growth of world-class companies of the fastest growing large economies of the world. High inflation and bear markets are phenomena more relatable to economies outside of India while we have much better things to look forward to,” says Deepak Mullick, author of Simply Mutual: The 1% Formula.

SIP beats Volatility

Experts say mutual funds are always worth investing in because Systematic Investment Plans (SIPs) help beat volatility over the long run. 

“SIP works best as it takes out market volatility and investors maintain their investing momentum irrespective of market changes. With time, mutual funds deliver good returns. Hence, mutual funds must not be viewed as a product to time the market but as time in the market,” says Sunil Damania, Chief Investment Officer, MarketsMojo. 

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The challenge

Having a 3–5-year investment time frame is ideal when it comes to investing in mutual funds. But unfortunately, the mutual fund industry off late has started underperforming the benchmark over a longer period, according to Damania. 

“One of the critical reasons seems to be that the industry has received substantial investor assets, increasing the size of the schemes. And as the scheme size increases, it becomes increasingly challenging for the fund manager to create an alpha,” he says. 

The opportunity 

According to Mullick, there is a huge scope for growth in the Indian markets, which bodes well for mutual fund investors. He says India currently boasts of having one of the most attractive demographics, with more than 900 million of the 1.4 billion population in working age. This is a highly educated, talented and aspirational workforce. 

“The low penetration of goods and services along with rising affordability bodes well for corporate India for years to come. This, combined with the huge demand for infrastructure will result in decent employment opportunities for our workforce for decades,” says Mullick.

“Mutual fund investors are well aware of the current situation. Due to the fact that India didn’t go overboard on the fiscal spending, there is no bearishness towards our stock markets when there is calibrated reversal of easy monetary policy. I believe that for the foreseeable future, mutual funds would remain to be one of the most popular choices for investors to participate in India’s growth,” he adds.  

Also Read: Rs 1 crore becomes Rs 5 crore in just 12 years at 12% interest. Should you invest? 

What should investors do?

Experts say that investors new to the equity market – who do not want to risk having an underperforming mutual fund scheme in their portfolio – may consider the Nifty 50 ETF through SIP to help adopt a disciplined investment and create wealth. 

Palka Arora Chopra, Senior Vice President of Mastertrust, says in the current scenario when the central banks are squeezing their balance sheets and raising rates due to rising inflation and higher commodity prices, investors should keep their SIPs. 

“If the market continues to drop, with valuations falling below historical averages, they should gradually increase their equity allocation in a controlled manner. An investor who is underinvested in equity should take advantage of the current market correction and begin rebalancing their portfolios to include more equities,” Arora suggests. 

Existing and aspiring mutual fund investors should also take guidance from professional financial advisors to make the most of their investments.  

(Views expressed above are those of respective experts quoted in the story and do not reflect the views of financialexpress.com. Please consult your financial advisor before making any investment decision)