Is this the right time to invest in Mutual Funds?

Is this the right time to invest in Mutual Funds? This is the most frequently asked question that grips every investor and also the one most flashed across the pink press every other day!!! Given the basic principle that investors cannot time the market and same is the case with any of the fund manager, there hence the spirit of investing in a professionally-run mutual fund is lost by the ideology behind the question! The question which every mutual fund investor should have is which mutual fund to invest in rather than when?

What investors should do now is to take a call on how much of their money is meant for the long-term, by which I mean money that won't be needed for five years or so. This long-term money should be invested in equity funds. Money that may be needed within the next five years should be invested in safer assets. Moreover, the money that is put into equity funds should be invested gradually, preferably through a Systematic Investment Plan (SIP), which takes away the temptation of fine-tuning the timing of one's investments. This approach reduces your problem to choosing the right funds. There are many ways of doing that, including an even further simplification by picking index funds.


For individuals who have already put money into equity schemes, the best strategy would be to hold on till markets show signs of some recovery; they would be ill-advised to book losses now. However, it's also a good time to evaluate their current portfolios and filter the 'stars' from the 'duds'. A word of caution: look at the risk-adjusted returns of a scheme instead of chasing absolute, aggressive and 'historical' returns.

Individuals with a shorter time frame in mind (i.e., 12-18 months), can consider investing in Fixed Maturity Plans (FMPs). With the yields being quoted in the range of 9.75% to 10.50% across the monthly, quarterly and yearly maturities, FMPs are looking very attractive right now. Investors can lock in their yields at the time of investing and thus gain from the current interest rate scenario.

Liquid and liquid plus schemes can also be given a look-in by investors for whom liquidity is of prime concern. Liquid/ Liquid-plus schemes are a smarter choice for savvy investors when compared with bank FDs since they give better tax-adjusted returns.

A final word of advice to investors as every other investment advisor provides is : invest in line with your risk appetite, time horizon and investment goals and do not get swayed by market gyrations!

Thanks for visiting my blog.
Shantaram
www.invest-insight.blogspot.com
Disclaimer: The author of this page is not a registered financial advisor, and you should not construe anything written here to be investment advise. You should consult a qualified broker or other financial advisor prior to making any actual investment or trading decisions. All information is a point of view, and is for educational and informational use only. No representation is being made that any investment made on the basis of data or information on this blog will result in profits. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.