What is the Best Time to Invest in Mutual Funds

Many investors want to know the best time to invest in mutual funds. However, the focus should be on investing money regularly and not on timing them. A frequent question from a lot of investors in mutual funds is “whether this is the right time to invest?” There are many debates and thinking behind the selection of when to invest in mutual funds, but this could be just the waste of time because the real effort needs to be focused towards ensuring that there is some actual investment made.

Best Time to Invest in Mutual funds

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Frankly speaking, there is no way that anyone knows whether the present time is a right or not till one looks at it in perception after the fact but it is imperative for the investor to ensure that they know the basics behind investing right.
If there is a bull market, make sure that one does not invest at the peak of the market and may lose their capital.
Here are some points that every investor should study while considering the time of investment.

What is the Best Time to Invest in Mutual Funds?

As I said, there is nothing called a good time or bad time to invest in the equity market, as long as investment horizon is long. If you are looking for something in the short term like less than 2-3 years, then I would recommend liquid mutual funds or perhaps balanced funds.
If you are looking for a long-term (more than five years’ time frame), then it is always the best time to invest. Note that; your mutual fund selection should be based on your risk profile, age, financial goals, the amount of investment and time horizon.

“In a time of destruction, create something.” ― Maxine Hong Kingston

When to Invest/In which phase to invest(Bull or Bear)?

This one is fascinating. When markets are falling, many investors feel that their money will be lost if they do not take it out. But that is not true, let’s see what is it meant by the bull market and bear market.
Bull Market – A bull market is a period of many days or months or years during which prices rise consistently. This phrase is referred to the stock market, but it can also be applied to real estate, commodities, bonds or foreign exchange.
Bull markets are characterized by investor confidence, optimism, and expectations that strong results should continue.
Bear Market – The opposite of a bull market is a bear market, in which prices fall consistently. Investors are not confident and refrain from buying.
Apparently predicting market trend is difficult. Markets are driven by psychological effects and speculations also sometimes play a significant role in driving markets.

Bull market and bear market

Bull and Bear Sketch By Andy Beck

As I said it is tough to time the market. If you ask any expert about timing the market, there are 90% probabilities that they will say they can’t. So it is tough to predict next Bull Run and trying to time the market has always been a risky task, and that will remain so in the future.
Unlike popular wisdom, it is actually a good time to invest in the stock markets when the markets are down. The worse the markets are, the superior returns you are likely to get in the medium to long term. The same thing applies to mutual fund also, where you get more units when markets are down.
So it is advisable not to wait for next Bull Run, just keep Investing regularly through SIP in Mutual Funds. There are times in which market goes through bull and bear phases. So take benefit of Bull phase and Invest heavily in Bear phase but with caution.

How To Invest/SIP/Lump sum – best time to invest in mutual funds

Investing and timing the market are different things. Investing through the route of SIP is the best way to invest in the mutual funds, and for this, you don’t need to time the market conditions. Since the investment is made every month regardless of the market condition, you gain benefits from both growing markets as well as a down market. In the case of bull runs, your portfolio will yield higher returns, and in bear markets, you will get more units of the fund for the same amount of investment (Obviously which will give better returns in future when markets go up).

In a Systematic Investment Planning (SIP) model investors get more mutual fund units when a market falls and fewer units when the market improves. Hence the average cost per unit decreases over the period; this is also called as Rupee Cost Averaging. To take benefit of this, you need to stay invested for a long term since market markets are volatile shortly and as I said it’s hard to time the market. Hence, it is always sensible to invest in mutual funds through the SIP route and set it on auto mode to make sure that it is made each month compulsorily.

If you wish to stay invested for the longer term, then mutual funds are the right investment decision. Holding the investments for a long run will benefit the investors, from the power of compounding, as well as zero tax long-term capital gains for equity instruments.

See: – How to Invest in Mutual Funds Online

Current economic scenario which will help you decide what is the best time to invest in mutual funds

1. Demonetization –This step taken by our government is a great step taking India on growth economy. It is good for our economy and equity market in the long term. But in the short term, we could see more volatility in markets due to this move.

2. Economic growth – After growing at 7.3% in FY2016, GDP growth is projected to further accelerate to 7.4% – 7.5% in FY2017 and 7.7% – 7.8% in FY2018. We also believe that there is further scope for monetary easing by the RBI, despite the 125 bps rate cut in the major policy rates (Repo rate now at 6.55%) in December 2016. While the speed of economic reforms may have been slower than expected by market participants, but I think that the steps taken by the government are in the right direction.

3. Low Oil Prices – We have seen huge fall in oil prices (from $120 to $20) in last five years. The biggest beneficiary of this fall was India, as it reduced Indian fiscal deficit in the large amount, as a result, billions of money have been saved per year. This saved amount can be used for development by investing in health care, infrastructure projects, education, etc. which can boost economic growth.

4. China Economy – As we have seen China economy is weakening day by day. This will shift business focus on growing market like India, which will obviously be good for our economy.

5. GST – Large numbers of taxation matters expected have been resolved due to the passing of GST. GST will transform the indirect tax system in India. It is one of the biggest tax reforms since the independence. It is a win-win situation for consumer and producer. Consumers will pay less tax while it will improve the operating efficiency of companies.

Looking at the current situation in share market, Sensex/ Nifty is expected to follow range bound movement, not anticipating a big rally in next one year. But analyzing current economic trend and past Sensex record, the market will rally exponentially in longer run expecting a huge return. Many fund managers forecasted Sensex could reach to 32000 within five years with this growth rate.
So, this is the right time to invest in mutual funds.

In the past, people who invested for the longer term in share market, have earned a huge return. In-fact, Sensex has given 9x returns in last 20 years, as the 30-stock index managed to rally from 3,000 level back in 1995 t0 30,000 in March 2015. The rally is still not over yet.

What should you Do – Start now

It is unnecessary in trying to determine when is the right time to invest because one has to assure that there is some amount that has actually been invested. Only when this is accomplished, then there be a chance that the investment has earned something and the investor will benefit. Just asking the doubts about when to invest will not accrue any benefit and the biggest task to do if one has not invested is that to start right now. Starting now will at least get the entire process off the ground and assure that one part of the investment action has been finished. Ideally one should have invested in the funds from the time that there were some gains made by the individual except in the case that has not been done then there is no reason to bother about what should have been done. This can’t be changed but what can make an impact is the fact that if there is some investment made right away, then it can produce good returns in the future.
The only point that the investor needs to figure out is how they should make this a habit. Mutual funds offer the facility of a SIP (systematic investment plan) where one can invest a set sum each month on a specified date.

Cover lost ground

If there has been a gap in the investment process or if this has not regularly been made, then there should also be an attempt to ensure that there is ground made up for the lost time. The investor has a lot of options that they can utilize in mutual funds for this particular purpose. They can make use of lump sum investment or Systematic Investment Plan (SIP). This will be enough for them to ensure that they have used the right path to achieve their financial goals.

When to Exit/Sell/Redeem Mutual fund units?

The solution to this question should be whenever your goals are completed or whenever you need money. Never sell units because the market is down or is expected to crash further. You must set your goals and when they are met, and then only you should redeem mutual funds.


-There is always the best time to invest in mutual funds.
-Invest by the SIP way to get maximum benefit from of the mutual fund.
-It is advisable to invest extra when the markets are not doing well than when they are doing very well.
-Compare the mutual fund performance and the fee structure with its competitor mutual funds before investing.
-Do research on the mutual fund manager’s performance track record before investing in the mutual fund scheme.

4 Replies

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  1. Ranjan Sharma says:

    This is completely true…6 months ago when sensex was at 25k, everyone was saying it will further go down to 22k and advised to hold till that time.

    But that never happened, and now we are at 28k. Best way is to do SIP. Very clear and informative. Thanks.

  2. Parminder says:

    A must read post for every new investors!..

  3. Himesh says:

    Now market is at high. Can i start now considering that it may go down soon?

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