INVEST IN MUTUAL FUNDS– Today is the time when all the nations are facing a slowdown due to Coronavirus. India stock market faced the highest loss of 10% due to pandemic. This was approximately the highest loss ever seen in the stock market. The stock market totally crashed.
There is always a fair amount of debate in investors regarding stocks and mutual funds on risk-return trade-offs. This is probably because of market volatility and the expectations investors tend to have from the market. The pros and cons have been discussed several times and plenty of arguments have been made to help make a choice. Before investing, an investor should be aware of the unstable nature of the equity market and try to find the opportunity of entering with new investments.
BEST TIME TO INVEST IN MUTUAL FUNDS
A bearish market is considered the best time to invest in stock markets and mutual funds. The worse the market performance is, the better returns an investor would get in the medium term and long term. At the same time, investing through SIP doesn’t need a continuous watch on the market, since the investment happens each month or each week on a regular basis.
Indian markets have performed strongly over the past few years, and equity funds have gained extremely well. So patience is the key and allocation is a skill. If an investor understands the markets, maintain a long term perspective.
So investors should invest in mutual funds when the market is down. But this should be done with SIPs running in parallel — not exclusively. Timing the market isn’t an exact science, and SIPs do well to protect an investor from wild swings.
Multiple strategies can be applied in mutual funds when the downfall is expected in the market. If an investor has a surplus, he/she can invest in short term debt funds or liquidity funds. Make sure to choose the fund with a low expense ratio to gain maximum benefits. A multi-cap mutual fund provides many different options during bearish markets to switch and manage funds according to the investor’s investment goals.
SIP: A SOLUTION
A SIP is a practice of investing a consistent sum of money in the same mutual fund scheme at regular intervals (say each month or each quarter) over a set period of time. What this leads to is good, old-fashioned common-sense: an investor ends up buying more of a mutual fund scheme when the price is low and buying less of that mutual fund scheme when the price is high. So we can say, a SIP is just a regular, automatic method of investing. The earlier a person starts investing, the more the benefits they are able to reap of compounding.
A SIP is a better way to invest, like timing, the market is something that many experts have tried to do but largely failed. The retail investors even more so tried it but failed. A SIP, therefore:
- Brings in some peace of mind, also reduces the stress associated with trying to time the market.
- Infuses a saving pattern in investors to do saving every month from their income towards wealth creation.
- A SIP automatically protects an investor from wild market swings – so he/she ends up buying more when prices are low, and less when prices are high.
So investors investing for long term or medium term it is the most beneficial time for them to invest in mutual funds especially equity mutual funds because prices are very down at this point in time due to Coronavirus. This will great returns to the investors in the future but only when they have proper knowledge of the financial market. No one can totally predict the prices since the market is very volatile.