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Markets are high, is it safe to invest in mutual funds?

Markets are high and many are saying there is a major correction going to happen. Is it safe to invest in mutual funds in this stage or should i wait till the markets fall and the NAV of mutual funds are lower than today?

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2 Approved Answers

riddhi

The stock market is very cyclical and it will keep having lows and highs. The returns, however, have been on similar lines irrespective of the market condition at the time of making the decision to invest.

Mutual funds are the best investment tools for investors who are risk averse as well as for those who seek risk, for those who want to invest money to fund their long term goal, as well as for those who want regular returns, for those who are new to the world of investing as well as for those who are not. Similarly, investment in mutual funds is independent of the market tide. Whether the markets are high or low, mutual funds offer various instruments that enable smart investment. The important thing is to determine what your goals for investing are and in what time frame do you wish to achieve them.

If you are still anxious of rising markets, then one option is to invest in a Systematic Investment Plan (SIP). Investing through SIP takes care of the volatility of the market as the purchase cost gets averaged out thereby reducing risk and providing decent returns. You can read more about the benefits of SIP here.

Also, if you have a lump sum amount and want to avoid short term market risk then you can invest through the Systematic Transfer Plan (STP) route. In STP you can invest the sum in a debt fund and then gradually transfer the amount to an equity fund in a periodic manner where the period could be quarterly or monthly as decided by you. The investment can also be transferred from equity to debt if the markets are performing poorly. This allows the investor to hedge the market risk to some extent and maximize returns. You can read more about STP here.

You can contact Groww if you need further help in investing money in a responsible and smart manner. Hope this answers your question!

Shikhar

Again, as with any investment, you must ascertain the duration of investing. Based on how long you plan to invest for, you must make a decision. But even if the markets are high, there is a way out.

  1. If you are investing for less than 1 year: If your investment horizon is less than one year, you can invest lump sum in debt funds. Debt funds are not easily affected by the volatility of the markets and are a relatively safe place to invest. Best debt funds.
  2. If you want to invest for 2-3 years: If this is your investment horizon, you can look to invest in balanced funds. Balanced funds are funds that invest partly in debt instruments and partly in equity. Over a period of 2-3 years, they can give good returns with moderate risk.
  3. If you want to invest for more than 4 years: In this case, you can look to invest in equity funds. However, if the markets are indeed high, you could suffer a short term capital loss. To counter this, there is an option called STP (Systematic Transfer Plan). In STP, you invest lump sum in a debt fund and gradually transfer the money to an equity fund. This helps you avoid short term market risk. Best funds for STP.

Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.
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