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Investments may be started as early as possible. Waiting for the right time and delaying investing, may cost you those precious returns. Any day is the best time to invest in mutual funds. Remember to invest as per your financial goals and risk tolerance.

In this article, we cover the following topics:

  1. What are Mutual Funds?
  2. When is the best time to invest in Mutual Funds?
  3. Which is the best mode to invest in Mutual Funds?
  4. Which factors determine the best time to invest in Mutual Funds?
  5. Conclusion


1. What are Mutual Funds?

A mutual fund is an investment where a large number of investors’ money is pooled in and professionally managed by fund managers. This benefits investors as they can get the advantages of scale as well as returns from a professionally managed portfolio at a fraction of the cost of what it would otherwise.

Between 2014 and 2016, the cash inflows in ELSS Mutual Funds increased from Rs. ₹2908 crore to ₹6413 crore. The country has started to move beyond traditional assets and invest in Mutual Funds for financial goal accomplishment. However, every investor always has a common doubt – Should I invest in Mutual Funds now or later? Finding out when is the best time to buy more fund units can be hard, but it is also crucial to your final earnings.

2. When is the best time to invest in Mutual Funds?

Mutual funds have gained large popularity among the investors. Owing to availability of several fund categories that suit investors across risk profile, there has been growing acceptance to invest in these funds. They are not only curious about the right way to invest but also about the right time to invest.

You can invest in Mutual Funds as soon as you start earning. There is no such thing as the best time and you may invest anytime you wish to. But it is always better to catch the funds at a lower NAV rather than paying a higher price. It will not only maximise your returns but also lead to higher wealth accumulation. So, following are three such scenarios which are suitable to begin investing in mutual funds:

a. The market is rock bottom

b. Bond yields are the highest, and/or

c. Real estate and infrastructure are at the lowest point

Any and all of the above represent an ideal scenario, but in reality, this time never comes. In fact, it’s practically impossible to define such a timeline. The best time to invest in mutual funds is, therefore, now!

3. Which is the best mode to invest in Mutual Funds?

The mutual fund industry assets have accrued over the years and the sector is on a boom with a growth of  37% as compared to last fiscal.  From Rs 13.6 trillion on March 31, 2016, the AUM (Assets Under Management) value stood at Rs 18.6 trillion on 31 March 2017. The net inflow of funds (sales minus redemptions) was a whopping (appx) Rs 3.5 lakh crore during the fiscal year 2016-17.

This proves that more and more Indians are choosing to invest in Mutual Funds than ever before. And if you, too, would like to do that then a SIP (systematic investment plan) is the best way to invest in any market. An SIP plan ensures that one does not need to time the market and think about the bull or bear period of the market.

When an investor initiates a monthly SIP in a mutual fund scheme irrespective of the market condition, he/she benefits from both an upmarket as well as a down market. In an SIP model, the fund managers purchase more units at lower NAV and lesser units at a higher NAV when the market rises. Hence, the average cost per unit declines over a period of time. This is known as Rupee Cost Averaging. For a long-term investor, SIPs make for a very effective tool of risk management.


 bull market

4. Which factors determine the best time to invest in Mutual Funds? 

We now know that instead of waiting for an ideal time to invest, it is better to start today and ensure that you follow the basics to get good returns. However, there is a second step in this process – finding out which funds you wish to invest in. This depends on several factors which include your personal goals as well. These are:

a. Risk Appetite:

Certain mutual funds are risk-free for investors who want safe returns. If you already have investments in other instruments like PPF, FD etc. and want quick returns, you can invest in high-risk, high-return funds which will help you maximize your gains.

b. Market positioning:

For low-risk investors, when the market correction takes place (10%-15%), it may be a good time to invest but for investors who are willing to take risk, investment can be made any time in for lump sum or SIP.

c. Return on Investment:

For high return seeking investors who look out for equity driven mutual funds may initiate SIP at any given point in time and don’t wait for the market to fall. They choose certain mutual funds which give a high return over the long-term (more than 5 years).

d. Tax Saving Under section 80C: 

Many funds offer schemes which are managed with the specific goal of tax-efficiency like ELSS schemes. Investors looking out for tax saving may invest in ELSS schemes via SIP or a lump sum amount to claim the tax deduction.

e. Long-term or Short-term horizon: 

Simply put, your investment horizon is the time period for which you are willing to stay invested. Long-term investments get high returns, but you need to be patient for this! In contrast, short-term investments can get you quick returns but they may not be as high as the alternative. If the investment horizon is of 5 years or more, then any time is a right time to invest your lump sum amount in equity mutual funds for a return better than most of the safe investment (For Example – Fixed deposits, Public Provident fund (PPFs) and other bonds)

5. Conclusion

Overall, there are many reasons why investing in mutual funds makes a good return. A little bit of due diligence and research can provide a good return and a safe investment for an investor. So investing in mutual funds is all about the correct fund with systematic investments irrespective of the time at which an investor is investing.

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