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Choose the best mutual fund at the right moment

05 Jan 2023

In any point. If you are wondering whether there is a right time to invest and if yes, how to ascertain it, you have come to the right place. There is no specific time that can be considered the right time to invest in mutual funds; you can do it any day. However, there are certain factors to look out for that can help you get the most out of your investment. 

What Are Mutual Funds?

Mutual funds are a financial instrument managed by professional asset managers or fund houses. They essentially pool funds contributed by several institutional and individual investors who have similar investment objectives. The assimilated funds are then used for buying capital assets. Investors benefit not only from the scale of the investment but also the returns at a lower cost. Additionally, since mutual funds invest in different types of instruments investors can benefit from the automatic portfolio diversification as well. Due to all these advantages, mutual funds have been attracting more and more investors in India. However, many are unsure about when to invest in mutual funds. 

When is the Right Time to Invest in a Mutual Fund?

Most investors will aim to maximize their investment returns, for which they will attempt to invest at the most opportune moment. However, for mutual funds, there is no rigid time window that you must invest in. Age is no bar, and everyone from students to senior citizens can opt for mutual funds at any given time. 

Which Factors Determine the Right Time to Invest?

In order to ensure that you are fully prepared to invest, there are certain factors you need to pay close attention to. These fundamentals can help your investment journey go smoothly. In order to find the right time to invest, you mainly need to find the right mutual fund. Here are a few factors you need to consider for investing in the right mutual fund at the right time:

  • Financial Goals
  • Risk Appetite
  • Market Positioning
  • Investment Horizon: Long-term or Short-term Horizon
  • Returns on Investment
  • Field Experience 

How to Pick A Good Mutual Fund to Invest in?

Once you have grasped the fundamentals, here are the aspects you should be confident in before you invest in a mutual fund:

  • Investment objectives:

Depending on your financial goals, you can determine the kind of returns you are aiming for. Is your objective significant growth or consistent income? While equity funds can give you great returns, debt funds offer more security.

  • Asset class:

An asset class is a category of financial instruments, that all share certain features and the risk varies according to which asset class you opt for. Accordingly, the returns will also vary.

  • Investment horizon:

Your horizon is essentially the amount of time you want to invest for. For instance f your investment horizon is shorter, you can go for debt-focused mutual funds for stable returns and fixed financial goals.

  • Mutual fund risk profile:

Prior to investing, look at how your risk appetite aligns with the risk profile of the mutual funds available in the market. The risk level of a mutual fund results from the assets it is exposed to. 

  • The performance history of the fund manager:

If you have settled on a particular mutual fund, it is essential to make note of the fund manager’s performance as well. Getting an idea of the manager’s history and potential can help you in understanding their credibility and whether they are a good fit for you.

  • Taxation on your returns: 

Taxation is one element you should not overlook. If the duration of the investment is less than a year, returns from equity funds are subject to 15% taxation, whereas long-term returns undergo 10% taxation, or no taxation if the amount gained is less than Rs.1 lakh.

To Conclude

In summary, there are several reasons why mutual fund investments are a wise decision. With adequate research, the right tools, and the right guidance, anyone can earn great returns from their mutual fund regardless of the time of investment. 

Related Articles: Investing in Mutual Funds is Now Easy with MO Investor App | Invest In Mutual Funds Online In 5 Simple Steps |  How to Analyse Mutual Funds for Big Returns | Tax Benefits of Investing in Mutual Funds | Mutual Fund - Need of Financial Plan

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