Mutual Funds: The Best Time to Invest in Funds

The best time to invest is when stock prices are at the bottom, when bond yields are at their peak and when real estate has hit its deepest low. Conversely, the best time to disinvest is when the reverse holds true. But doing any of these things is humanly impossible, consistently, even with all the luck you can imagine.

Therefore, the best time to invest is now. It isn’t when you start investing that is important. It is how you invest that holds the key to your success. There are new developments every day, asset cycles change, businesses vanish and mushroom every day. Life goes on. And as it does, so must your investments.

Let’s take a recent example. When demonetisation was announced, it caused a big flutter. But look at things today, and the world is moving on. There might be more payments via wallets and apps and via electronic means, but business is getting back to normal. For instance, the mutual fund industry has seen its assets swell 37% last fiscal—to Rs 18.6 trillion on March 31, 2017 from Rs 13.6 trillion a year ago. There has also been a net inflow of funds (sales minus redemptions) of about Rs 3.5 lakh crore during the fiscal.

What this points to besides the resilience of sectors is the growing popularity of the instrument as a tool for savings. This is because mutual funds allow you the flexibility to tailor your investments to suit your specific needs.

Let’s take the example of short-term liquidity savings. You can set aside a small sum every month for unforeseen exigencies and put it in a liquid or short-term debt fund. The money can be withdrawn at short notice and the yields are better than a bank savings account. Once this corpus swells to a size that you deem is beyond your exigency needs, you can easily shift such additional resources to a longer-term savings instrument like a balanced fund or a growth fund.

The key to a successful wealth creation strategy is regular, continuous investments. And if your investment in an asset class is based on a sound long-term view, the best way to contend with the timing factor is to average— invest fixed sums of money at regular intervals to ensure that your average cost of investment per unit stays well below the average market value.

The best way to do this is to opt for an SIP (systematic investment plan) or follow a disciplined rupee-cost-averaging approach yourself—if an SIP option is not available for the instrument you wish to invest in.

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