When is the best time to buy mutual funds?

Stock markets are very high, is it the right time to invest in mutual funds?


To sum it up, the right time to invest in Mutual Funds is now. The earlier you start, the more you benefit due to the power of compounding. Mutual Funds are the most suitable investment tool for novices learning the art of investing, as well as people who do not have the skill or the time to undertake systematic analysis.

The father of value investing, Benjamin Graham once wrote that making money on investing should depend “on the amount of intelligent effort the investor is willing and able to bring to bear on his task” of security analysis. Whilst investing in mutual funds it is important to look at the bigger picture and not think about short term results.

General perception is that the good time to invest in Mutual Funds is during a bearish market, as equity can be purchased for a low amount, thereby increasing the probability of benefitting from capital appreciation.

However, unlike popular wisdom, a good time to invest in markets is not only when the market is bearishbut also when the market is bullish. The point made earlier of looking at the bigger picture comes into play here.

Since investments in schemes like SIPs are made each month irrespective of the market condition, there can be benefits from both an up market as well as a down market. In the SIP model fewer units are bought when the market is high and more units are purchased when the market is lower, with the average cost per unit declining over time helping in risk management.

Another important factor to consider when deciding to invest in Mutual Funds is selecting the right mutual fund house. You must analyze the performance of the house over a full market cycle of three to five years. Investing in a mutual fund is ideal for a new investor or retired individuals. Mutual funds don’t have the volatility of the stock market and picking the right mutual fund house would lessen the burdenof conducting in depth and long term analysis on your part. This job gets transferred on to your Mutual Fund House.

Having a diverse portfolio would help diversify losses even if some of your investments perform badly which is sharp contrast to investing in stocks.


Do SIP, its averages out your investment.

You dont need to wait for right time. Start as early as possible and do SIP instead of lumpsum investment.

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