When should I start investing in mutual funds?

A popular proverb says, “The best time to plant a tree was 20 years ago. The second-best time is now.” This holds true when it comes to mutual funds as well. If you have the money to invest a lump sum or a regular income to start a Systematic Investment Plan (SIP), you could choose a mutual fund that works for your current financial situation and start today. Mutual funds are almost always a long-term investment option. With time, mutual fund investments are believed to offset small-term market vulnerabilities and earn you a profit.

Mutual funds are always ready for you, but you have to make sure that you are ready and prepared for investing in mutual funds. Let’s go through a few factors that can help you understand whether it’s the right time for you to start your mutual fund investment.

Can you afford a mutual fund?

There are two ways to invest in a mutual fund; you can either invest a lump sum amount or earn regular profit from it or you can invest an amount monthly through SIP to steadily grow your money over time. It doesn’t matter what your choice is here, you should analyse which one works better for you right now.

If you are planning to invest a lump sum, it’s ideal to not withdraw from it prematurely because it could hamper your profits with low growth and fees like exit loads. Hence, you should consider if you are okay with keeping that money invested for a long time. On the other hand, if an SIP is your choice, make sure that you select the amount that you can afford to pay every month and that your SIP doesn’t stop mid-way.

How well do you know mutual funds?

The first step of starting to invest in mutual funds is studying it very well. When you are investing your hard-earned money in an investment vehicle like a mutual fund, you should know thoroughly about it. Getting to know about mutual funds is easy nowadays – there are a lot of resources available online which will help you with information regarding mutual funds.

There are plenty of tools such as SIP calculators and mutual fund calculators which will help you understand the math of it as well. The right time to invest is always after you have thoroughly understood the nature, risk, and expected returns of your investment choice.

Have you considered the market condition?

Mutual funds are market linked. The money you invest is used to buy different securities such as stocks, bonds, etc. Hence, your investment could be affected by market conditions. As said above, in the long term, mutual funds are considered to offset smaller setbacks, hence a longer investment horizon is preferrable.

Not only that but different mutual funds are also suited for different market conditions and understanding what works when is important. You could always consult a financial advisor to help you with these decisions and advisory is available on most of the broker websites.

How do you invest in mutual funds?

The best way to invest in mutual funds in India is through the online process. Most broker websites will let you research, compare, and buy MFs online and it is usually a seamless process. All you have to do is find the fund of your choice and go to a broker website and follow the steps listed there.

Mutual funds are a time-tested investment vehicle. They leverage the time you have kept your money invested for and lower risk by adding a layer of diversification to your portfolio. If you have mutual funds on your mind, it is a great idea to waste no time and start as early as you can.

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