Have you ever asked your parents what they did with their first salary? I’m sure most of them would have said they bought something for their parents, like a shawl for their father or a saree for their mother, right?
It feels great when you can do something for the people you love. But with the changing times, everyone’s priorities have changed as well. So, it makes sense when you hear that in today’s world, the best gift you can give someone is the gift of investment. I mean, just look at the ever-growing inflation rates!
Now, let’s assume you’ve FINALLY decided to start investing in mutual funds. Now, the question arises, “Is there a right time to invest?” What a strange question, right? Trust me, it’s not. Don’t worry! I, Ishita Singh, am here to clear your confusion and delve deeper into when you should invest in mutual funds.
Prioritise, and You Will Be Good to Go!
Deciding to invest in mutual funds is a great decision. Trust me, you’re on the right track, and your future self will thank you for not being a fool. But before you jump in, let’s take a step back and think about your goals. After all, we don’t want you to end up as a broke investor, do we?
Let me give you an example. Think about the last time you went grocery shopping. If you overbought, chances are you had to prioritise what you needed the most and leave some things behind. Investing works the same way! Before you start investing, it’s important to prioritise your goals. Do you want to save for a down payment on a house, plan for your child’s education, or build your retirement savings? Whatever your goals may be, prioritising them will help you determine which mutual funds to invest in and how much to allocate to each one.
Let’s Pivot Back to the Main Subject- When Should You Invest in Mutual Funds?
Without beating around the bush, I’ll give you a straightforward answer. THE RIGHT TIME TO INVEST IS WHEN YOU DECIDE TO INVEST! Yes, you read that right. NOW is the perfect time to take the first step towards financial freedom. However, before you jump into the world of investing, let’s make sure you’re fully prepared. It’s important to remember that when investing in mutual funds, you’re investing not only your hard-earned money but also your time. If you’re under a time constraint, putting your money in a fixed deposit (FD) is better. Additionally, you must fulfil two conditions before you dazzle your financial world with the brilliance of mutual funds.
First things first, let’s see if you have any surplus money that you can afford to invest. If you do, that’s great news! But hold on just a sec- let’s not forget about any other financial commitments you may have, like paying off debts such as education loans, personal loans, auto loans, and credit cards. I know, I know- debts are no fun. But trust me, prioritising those payments before investing can help you improve your credit score and overall financial stability. And that, my friend, can ultimately help you achieve your long-term financial goals.
Secondly, ensure that the money you have set aside for investment is available for at least 5-6 years. I know what you’re thinking- “I don’t need it right now, but who knows what the future holds?” It’s a fair point, but if you don’t have a backup plan in case of emergencies, it’s best to hold off on investing in mutual funds for now. Remember, investing is a long-term commitment, and you don’t want to be in a position where you have to withdraw your funds early, potentially incurring penalties and losing out on potential returns.
If, for some reason, you’re unable to fulfil either of the two conditions, then don’t even think about starting an investment! Let’s be honest; you’re better off waiting in such a situation. Remember the old saying, “Durghatna se der bhali?” It basically means “better late than sorry.” Trust me, you don’t want to be the person who jumps in too quickly and ends up regretting it later. So take your time, my friend, and invest in the right way.
“I Fulfil the Above Two Conditions, What Next?”
Well, first of all, WOOHOO! Congratulations! You have both the money and time to invest. Now, you might be wondering, “What next? Do I need to time the market before I start investing? If yes, how should I go about it? Come on, I need answers! Help me!” Whoa, whoa, whoa! Hold your horses, buddy! Take a deep breath and relax. Let me answer your question about timing the market. The truth is, no one can consistently time the market. And even if you somehow manage to do it, it will have little to no consequence on your returns. Let me give you an example to put things into perspective.
Recently, my team and I conducted a study where we randomly picked 5 funds and calculated their average return over a period of 5 years based on 3 different investment criteria. We analysed how the funds performed when people invested in them at the market’s peak and lowest and when they invested randomly.
The results clearly indicated that timing the market didn’t really have a significant impact on the returns of these funds. So, drum roll please… the average returns were as follows:
When the market was at its highest- 15.79%
When the market was at its lowest- 15.50%
When the investments were done randomly- 14.71%
So, do you understand what I was trying to say earlier? If you have the financial resources and time, it’s best not to postpone investing and start as soon as possible. Always remember- “Kaal kare so aaj kar, aaj kare so ab. Pal mein pralaya hoyegi, bahuri karega kab?” which basically means “What you can do tomorrow, do it today. What you can do today, do it now. Time and tide wait for none.”
On a Parting Note
Investing in mutual funds can be a great way to achieve your long-term financial goals, but it’s important to do it responsibly and with a clear understanding of your priorities. But before you take the plunge, it’s important to consider your current financial situation. Do you have any outstanding debts that you need to pay off first? Do you have enough surplus funds that you can invest without compromising your day-to-day expenses? If none of these issues concern you, then remember, the right time to invest is when you decide to invest, which should be NOW! So, take your time, prioritise your goals, and invest wisely- your future self will thank you for it!
Please share your thoughts on this post by leaving a reply in the comments section. Also, check out our recent post on “Do Mutual Funds Have Risk? If So, How Can You Reduce This Risk?”
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Disclaimer – This article is for educational purposes only and by no means intends to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing.
