Is This the Right Time to Invest in Mutual Funds?| North Loop Official Blog
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20 Oct 2020

Is This the Right Time to Invest in Mutual Funds?

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What are mutual funds?

Mutual funds are market-based investment instruments that give exposure to expert managed portfolios. When you invest in mutual funds, you get allotted with fund units based on the amount spent, and the pooled investments get handled by professional fund managers. Investing in mutual funds can be beneficial because they provide the advantage of scale as well as returns at a low cost. Moreover, since they involve a variety of instruments, there is also the benefit of diversification.

When to invest in mutual funds?

If you are wondering ‘should I invest in mutual funds right now’ or ‘should I invest in mutual funds when the market is down’, you should continue to read further.

Mutual funds have been experiencing growing acceptance due to the availability of several fund categories that suit different types of risk profiles. Moreover, the flexibility and liquidity they offer have made them one of the most a popular investment options among investors. However, if you have been wondering ‘should I invest in mutual funds right now’, then you must understand that there is no perfect time to invest in mutual funds. That is because, in reality, an ideal scenario never exists. If you base your investment decision on ideal situations, then it can get impossible to identify a perfect timeline for investing in mutual funds.

As per experts, its recommended to spend more time researching the various fund houses and assessing their performances rather than thinking about the perfect time to invest. However, if you want to look at two ideal scenarios created by experts that are suitable to make mutual fund investments, these are -

When markets hit rock-bottom
When bonds yields are at the highest

However, if you invest in mutual funds via a SIP, then you can benefit from both down as well as up market cycles. That is because when the markets are down, you can buy more fund units at lower prices and vice versa.

Now, if you are still confused or wondering ‘when to invest in mutual funds’, then you should remember that if you invest in mutual funds, you can benefit from it regardless of the time of investment or the market condition. That is because the fund managers and their team of analysts professionally handle the portfolio in such a manner that they pick only the right securities and assets suitable for that particular moment. That ensures decent returns even during times of market volatility.

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Factors that determine when to invest in mutual funds -

By now, you must have understood that instead of waiting for an ideal time to invest, it is better to start soon and do adequate research so that you can earn good returns. The various factors based on which you can choose the funds that best suit your needs are as follows -

Risk appetite - You should choose mutual funds depending on your risk appetite. The investment amount and duration should also depend on your risk profile.

Return on investment - If you are a high-risk investor, you can invest in equity to get high returns. For those who have a significant idle corpus, investing in a lump sum is also a suitable option. However, if you are willing to invest a fixed amount at regular intervals, then that is possible through SIP.

Tax saving mutual funds - Choosing the right mutual funds can also offer tax benefits under section 80C of the Income Tax Act, 1961. Several fund houses offer tax-saving options under the ELSS (equity-linked savings scheme) that comes in with a lock-in period of three years and is eligible for tax deduction under 80C.

Investment horizon - While assessing the risk profile and financial goals, it is also crucial to keep in mind the investment horizon which can be either short-term or long-term. Long-term investments deliver higher returns when compared to short-term ones as the risk involved is higher and vice versa.

Conclusion -

You can earn high returns by investing in the right mutual funds irrespective of the time of investment.

To invest in mutual funds online, you can sign up with North Loop. We offer a digital investing platform, 24*7 customer services, personalized fund recommendations based on your goals as well as the help of professional mutual fund advisors to make your investing journey a seamless one.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.