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When Is The Right Time To Start Investing In Mutual Funds?

Adhil Shetty


Mutual funds are an easy, convenient and an effective tool to fulfil your financial goals. Managed by fund managers, mutual funds are investment schemes where in a group of investors come together to buy stocks, bonds, deposits, gold and other securities. Fund managers take a call on your behalf and charge a commission for their services. There’s a mutual fund for every kind of investment – be it short-term, medium-term or long-term.

To ascertain the right time for investments in mutual funds is tricky, but one should start investing in mutual funds as per their financial goals and risk appetite. You may still like to consider these situations to get started in mutual funds investment.

Your First Pay Cheque Day

It is always wise to start investing in mutual funds as early as you can. This ensures you have longer investment horizon which results into solid compounding effect. So start investing in mutual funds as soon as you get your first salary as this will give you 30-35 years of working life ahead. No other phase of life could be as right as this stage to invest in mutual funds by way of systematic investment plan (SIP). A tenure of 30 plus years of investment can actually do wonders and you end up create a massive wealth by the time you retire.

Significant Market Crash In Short Duration Of Time

When there is a massive crack in markets due to economic slowdown or any other financial crisis and markets nose dive significant points in a matter of a year or two, it’s quite an opportunity for seasoned investors to start investing in mutual funds. However, there is a catch here. During down cycle of markets, no one knows where the bottom of markets actually is. You really have to be smart in deciding when to enter markets by way of mutual funds. Once you are have invested in mutual funds, remain invested in

Day You Realise Your Long-term Financial Goals

Financial goals are important in life. Some realise it early, some later and some never understand the importance of financial goals. In such a situation, whenever the realisation sets in you that there should be financial goals for easy and convenient life, that’s the appropriate time which you can consider as right time to start investing in mutual funds.

Whether you are in your 30s, 40s or 50s, it hardly matters. Given your age and investment tenure there are various products available in mutual funds which can assist you reach your goals. Further, where the markets are, also does not matter. Irrespective of where the markets are – high or low – you should start investing with a focus on your financial goals. Better late than never. Keep investing through SIP and do additional purchases when the underlying securities, stocks or bonds. This will help you average out cost of investments faster while accumulating more units at lower price and you can benefit when the market goes in the uptrend.

The above-mentioned situations in any individual’s life should be treated as apt time for investing in mutual funds. However, investors should understand that timing in the markets is not important; what is rather important is the time spent in the market.

Quite often, it is seen that when investors try to time the market, the strategy hardly yields the desired results. Either they end up making deep losses upon losing patience or they are unable to generate adequate wealth to address their goals. More importantly, continuous strategy of timing the market keeps you out of the markets for considerable long time. And when one fine day you decide it is right time to enter, you fail miserably and withdraw your entire investments at a loss. This continuous process of ‘ins and outs’ of the market does not let your investment compound nor you accumulate sizeable number of mutual fund units. This only adds up to your financial stress which may result into mental stress as well.

So ideal way of investing in mutual fund is your discipline and regularity with your investments irrespective of market cycles till you achieve your financial goals. It is always advisable to take help of a seasoned financial expert while investing in mutual funds. A financial advisor will guide your as per your income, financial goals and risk appetite.

The writer is CEO, BankBazaar.com