Your Money: Any time is the right time to invest in mutual funds

December 11, 2020 2:17 AM

Just keep in mind your risk appetite, investment horizon & financial goals when choosing a fund

Mutual funds have gained popularity among retail investors owing to their flexibility.

Investors often wonder when to invest in mutual funds. Little do they know that there is no right or ideal time when it comes to investing in mutual funds. Before choosing a mutual fund scheme, an investor should try to take into various factors such as investment horizon, their risk appetite, financial goals, etc. In short, these parameters should align with their investment options.

A mutual fund is a financial vehicle wherein a fund house or an AMC (asset management company) pools the money from several investors and invests it in varying securities such as bonds, money market instruments, stocks, etc. The pooled investment is professionally managed by a fund manager. Fund managers hold an in-depth understanding and knowledge of the volatile markets. In return, the fund houses charge a small expense ratio to manage mutual fund investments.

Growing popularity

Mutual funds have gained popularity among retail investors owing to their flexibility. There has been a mounting acceptance to invest in mutual funds online due to the accessibility of several types of mutual funds that cater to the varying needs of investors across all risk profiles. Today, investors are not only curious about the right mutual fund to invest in, but also concerned about the ideal time to invest.

Investors can make investments in mutual funds as and when they desire. But it is always preferred to catch the mutual funds at a lower NAV (net asset value) rather than a higher price. It will not only help to maximise your returns but also lead to better wealth accumulation over time.

The three ideal scenarios that are suitable to invest in mutual funds are when (a) bond yields are surging to be the highest; (b) stock markets have hit the rock-bottom; (c) development in the realty sectors
has leapt.

Any or all of the above situations represent an ideal scenario, but in reality, this time never comes. Or if it does, one isn’t able to map it accurately. It is impossible to define this timeline. As an investor, you should not wait for these hypothetical situations and instead invest in mutual funds whenever you want to and have the funds.

Source: Tax Guru

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