When should I Start Investing in Mutual Funds?

When should I Start Investing in Mutual Funds?

In the last few years, a lot of awareness has increased among Indians regarding finance. But along with awareness, they are still confused about when they should start investing in mutual funds. Many people keep thinking about the best time to invest in mutual funds.

The best time to invest in mutual funds is maybe 10 years back or 5 years back or maybe one week back. Honestly speaking, it’s not possible to predict the exact time to invest in mutual funds. Whenever you decide to invest in mutual funds can be considered as the best time to start investing.

It’s not possible for anyone to time the market. Everyone wants to buy mutual funds at low prices and sell at high. But it’s not always necessary that you may achieve this. So instead of thinking a lot, you must start investing in mutual funds from today itself.

When to Start Investing in Mutual Funds?

Mutual funds are becoming very popular among investors, especially Millennials and Gen Z investors. There are so many types of mutual funds available in the market, and you can choose the one as per your goals.

But today, investors are concerned a lot about timing the market. They are curious about knowing the best time to enter the market and invest at that time. But in reality, there is no best time to invest in mutual funds.

You can start investing in mutual funds whenever you want. Don’t wait for the perfect time. In fact, by waiting for too long, you may lose the benefit of the compounding effect.

In general, you should take care that you buy the mutual fund at a lower NAV (Net Asset Value) and sell it at a higher price. This will help you maximize returns and achieve the goal of wealth maximization.

For small investors, SIP (Systematic Investment Plan) is a very good option. Here you don’t have to worry about timing the markets. SIP allows you to invest a fixed small amount in mutual funds at regular intervals. As you are investing at regular intervals, there is no need to time the markets. This way, your investment will not be affected by the volatility of the markets.

So, the best time to invest in a mutual fund is now or whenever you wish to.

Factors considered when Investing in Mutual Funds

There are certain factors that you need to consider while investing in mutual funds. Let’s consider them:

1. Investment Goals: One should invest in mutual funds considering their investment goals. For long-term goals like retirement planning or child education, you can invest in equity-related mutual funds. Whereas for short-term goals like buying a new car or planning for a vacation, you need to invest in debt funds.
2. Risk Tolerance: Your investment strategy depends on your risk tolerance capacity. If you are an investor who can take high risk, then you can invest in mutual funds that give higher returns but have higher risk. Equity mutual funds are risky investments but offer higher gains. On the other hand, if you are an investor who can't take risk, then it’s advisable to invest in low-risk investments that offer stable returns. Debt mutual funds would be a good option for such investors.
3. Market Positioning: Investors who are willing to earn high returns and ready to take the risk can invest at any point in time. This is because they will face all market cycles and corrections as they earn high returns. On the other hand, risk-averse investors shall invest when the markets are corrected. After the downfall in the markets, they try to recover the loss.
4. Mode of Investment: You can invest in mutual funds either as a lump sum or through the SIP route. When you invest the entire amount at once in a fund, it is called lump sum investing. Whereas, when you invest a fixed amount at regular intervals, it is called SIP. If you have enough funds in your savings account, then you can invest a lump sum amount in mutual funds. Whereas, if you don’t have a lump sum amount, then you can think of going through the SIP route. Here you invest a fixed amount in a mutual fund at regular intervals.

Conclusion

Timing the markets is a tough task. It’s not possible for anyone to determine the best time to invest in mutual funds. So, whenever you wish to invest, you shall start investing; there is no need to wait. Because if you keep waiting, you may miss out on taking full benefit of the compounding effect. The longer you stay invested, the higher the returns you get.