When is the right time to invest in Mutual Funds?

When is the right time to invest in Mutual FundsWhen is the right time to invest in Mutual Funds?

Stock markets are reaching peak. Fund Managers are investing more in large cap stocks now. You might be postponing about investing in mutual funds. Many of us postpone investments waiting for right time to invest in stock markets. You would have also got doubt that when is the right time to invest in mutual funds? Middle aged persons keep thinking whether they delayed investing in mutual funds? Pre-retirement individuals think whether they can still invest in good mutual fund schemes? In this article we would provide some interest points about when is the right time to invest in mutual funds.

Also Read: Best Equity Mutual Funds to invest in 2018

What are Mutual Fund Schemes?

If you are already familiar with mutual funds, you can skip this section.

Mutual fund schemes are investment vehicles which pool the money of several investors and invest it on their behalf in securities like stocks, bonds, money market instruments etc. These funds are managed by highly qualified professionals who allocate the fund investment and attempt to produce capital gain and income for the fund investors. They charge a small fee for managing the money. Every mutual fund has its own objective and its portfolio is structured and maintained to meet that particular objective mentioned in the prospectus. 

When is the right time to invest in Mutual Funds?

1) Yesterday, today or tomorrow – When is the right time to invest in mutual funds?

If not yesterday, then it is today. The process of wealth creation needs patience and discipline. In short-term investment horizon, the performance of the portfolio can be extreme, but in the long run, the performance normalizes. Irrespective of the time of entry, an investor has to invest in mutual funds for at least 8-10 years to enjoy the benefits. In the long run, equity mutual funds have always outperformed. 

I have many readers on this blog who comment saying they are investing specific SIP amount in mutual funds now and already planned to increase their SIP amounts from next month. What a planning right?

2) Young age, Middle age or Old age – When is the right time to invest in mutual funds?

The investment planning needs to be started at an early age. One can start with small SIP as soon as he begins with his job. Slowly and gradually, the invested fund will become huge. Never stop a running SIP, just increase or decrease the total amount you are investing every year depending on the pay-scale and situation. If you missed investing at young age, don’t worry, start at middle age. It would be useful for your child education or even useful for advance planning for retirement. Even at retirement stage, investing in MIP Mutual Funds would be great idea.

3) SIP or wait for lump sum investment – When is the right time to invest in mutual funds?

The general rule of investing says that invest gradually in equity mutual funds. Investing lumpsum especially when markets are peak is not advisable. Gradual investing works out well when one is doing a SIP from a monthly income. Every month, a fixed income goes into investment, leading to cost averaging and eventual high returns. However during stock market crash or under bearish stock market, one can also go for lumpsum investment in aggressive mutual funds.

4) Invest after marriage or after kids are born – When is the right time to invest in mutual funds?

If you are looking to achieve long-term financial goals for your children like child marriage or education, there is no right or wrong time invest in mutual funds. Sooner you start, better it is for you and your child’s future. Investment for your children is a crucial step that should be taken after studying carefully market risks, benefits, and all other scenarios of various options available in the market.  You can look for best mutual funds for child education in India.

5) Bull Run or Bearish market – When is the right time to invest in mutual funds?

If you are investing via SIP, there is no need to worry as the fund managers are experienced players in this field and they already corporate in the consequences of a bear market. If you are investing in a lump sum, you can wait for stock markets crash or bearish markets. The golden rule of investing in mutual funds is do not panic to market volatility. One has to be systematic in investing. Most of the people tend to be impulsive in the purchase of mutual funds. They buy whenever they have the money or there is an NFO. Then, when a down-market arrives, they simply ignore it giving the reason of lack of funds. 

6) Low NAV – High NAV of Mutual Fund – When is the right time to invest in mutual funds?

Many investors think that it is better to buy mutual funds with lower NAV as it allows you to buy more units of mutual funds, but it is a big myth. The amount of your investment remaining unchanged, between two funds with identical portfolio, a low NAV would mean a higher number of units held and high NAV would mean a lower number of units held. But, under both the situations, the product of the number of units and the applicable NAV (i.e. the value of your investment) would be identical.  Therefore, it is the stocks in the portfolio that determines the returns from a fund, not the NAV.

7) Investing in NFO or Invest in Existing Mutual Fund Scheme – When is the right time to invest in mutual funds?

Investors often view NFO as an IPO. But, there exist a difference between the two. The price of a stock is based on the demand and supply of it whereas the mutual fund units have an unlimited supply. There is no impact of the demand on NAV. The units are created as and when required. NFOs are at times launched to create a buzz in the market and attract new investors but, every NFO is not successful. An investor has to be very cautious while investing in NFO. An existing fund has a proven track record. It has passed various market cycles and it would be better equipped to take advantage of the market. Let the new entrants prove themselves on the ups and downs of market and you have numerous existing funds to put your hard-earned money. Hence investing in a unique NFO is okay, else one should invest in existing mutual fund schemes.

8) Financial Advisor adviced you or Self Planning – When is the right time to invest in mutual funds?

Have you got a call from financial advisor asking you invest in mutual funds and you proceeded for investing in funds? Why someone has to push you about your investments. One should plan themselves and seek for advice if required and invest regularly. If you got bonus or variable pay or excess money lying, there should be self motivation to invest in mutual funds.

Next time, don’t ask question when to invest in mutual funds !!!

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When is the right time to invest in Mutual Funds

Suresh KP


  1. Yes, I agree thoroughly with the writer here. If not yesterday, today you must put money in SIP investment plan as these are free from risks and offer better returns on investment.

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