ANALYSE TO KNOW THE RIGHT TIME TO INVEST IN MUTUAL FUNDS

A mutual fund as you know is an investment vehicle that pools the money of several investors, having same financial goals. These collective funds are professionally managed and invested by fund managers, returns generated on the same minus the portfolio management cost is then enjoyed by investors. Mutual funds are a mode of investment that lets its investors enjoy steady flow of income or capital growth for short or long term, depending on one’s investment goals. Though an investor must look at several factors before investing, but one of the most important is ‘When to invest?’

It is a question that holds much relevance in every investor’s life. Experts say that it is good time to invest in equity markets when the market is bullish, but they also advice not to at the peak as one is at risk of losing capital. Another school of thought considers investment in stock market via mutual funds when the market is down. Also, it is said that worse the markets get, better are the returns to get for medium to long term investments. SIP (Systematic Investment Plans) on the other hand is a safe route of investment and one need not worry much about timing the market for investment. It is simply because it is monthly plan of investing one’s money so whether the market is up or low, one is bound to benefit from both.

Definitely with the market being bullish it is more rewarding as in case of it being bearish. But when the market is bearish, one gets the edge of more units of the investment which will in future lead to better returns, as people buy more when the markets fall. Thus there’s a decline in the average cost per unit over a period of time, which becomes an effective risk management tool. But in order to avail this benefit an investor must hold on and stick to the investment for a long term even when the market is witnessing high fluctuations. So, investors who are not willing to take much risk with their funds should take the SIP route for investments and automate the payment for each month, to ensure regularity.

Apart from timing your investments as per market’s performance is just one factor. There are several other factors that an investor must check into and analyze before investing and hence decide on when to invest. Some of these factors are the investor’s financial goals and term of investment. His/her risk taking ability. Performance and background of the fund house, past performance of the fund and even evaluate the skills of the fund manager by observing their functioning and performance for a full market cycle for 3 to 5 odd years.

Also, one must not ignore taking various fees and loads involved in to consideration. Funds you wish to invest in should also compare the performance of the mutual funds with other competitors and peers, so as to gauge and analyze returns, fees etc. Research becomes the homework that every investor must do before investing, so they know when is the right time for them to invest in mutual funds?

Author Bio – Having varied interests and diverse knowledge, Himani Arora writes articles for several sectors and categories in personal finance, types of mutual funds and investments for reliancemutual.com