Thanks to their liquidity and flexibility, mutual funds (MF) are a great way to grow your money. And the sooner you start your investment journey, the more likely you are to enjoy superior returns and wealth creation. Still, your decision to begin investing in MFs should be based on your risk tolerance and financial goals.
This article will take you through some factors to help you determine the ideal time for investing. Also, we will explore the best mutual funds to invest right now.
Mutual funds collect funds from many investors to invest in various assets like stocks, bonds, or other securities. These funds are overseen by professional managers who aim to achieve specific financial goals, including growth, income, or liquidity.
Mutual funds offer various schemes, including equity, debt, and hybrid funds, each catering to different risk appetites and investment horizons. Equity funds focus on stocks and aim for long-term capital growth. Debt funds invest in fixed-income securities for stable returns, while hybrid funds combine equity and debt investments for balanced growth.
Investors can contribute to mutual funds through one-time lump sum investments or regular Systematic Investment Plans (SIPs). SIPs allow for regular investments, promoting disciplined saving and investment habits. Mutual funds are suitable for individuals seeking diversified investment options with professional management.
You can use mutual funds to invest nowand start building your corpus today! Here are some factors that will help you get an idea of the right time to begin your investment.
If you want to achieve high ROI over the long term, equity funds are your best bet. On the other hand, you can distribute the risk over time by investing in Systematic Investment Plans (SIPs). You must bear in mind that you have to stay invested for a minimum of three years to enjoy good returns. Accordingly, you can decide on your investment timing.
Your financial goals influence whether you should go for a short-term or a long-term investment. For short-term goals like the down payment of a house, purchasing a vehicle, taking a vacation, etc., you can choose a short-term horizon. For this, any debt fund option is prudent, like government securities, commercial papers, etc. Alternatively, for long-term goals such as a wedding, education, retirement, etc., you can opt for equity funds. Long-term investments typically yield higher returns, as the risk is higher.
MFs are market-linked products. Thus, you can calculate your investment timing by observing market trends. If you have a high risk appetite, enter the market at any time.If you want to avoid risk, enter the market once it corrects.
Analysing your risk profile helps you determine the investment amount, duration, fund type and ultimately the timing for the best MF to invest now. Depending on your tolerance for risk, you can choose from debt, equity, and hybrid funds. Choose equity funds for a substantial capital appreciation if you’re willing to bear the risk.
Additional Read: Investment Strategy during Market Highs
The earlier you start investing in mutual funds, the greater will be the returns you enjoy. Let’s understand this through an example.
Say, A and B are individuals who start their investment journey at different ages.
A, at the age of 25, invests Rs. 10,000 in an SIP offering a return of 10%. By the time A is 55 years old, their corpus will have grown to Rs. 2,27,93,253.
B2, at the age of 35, invests the same amount in the same SIP. By the age of 55, their corpus will only grow to Rs. 76,56,969. The table below illustrates the returns in greater detail.
| Retirement age 55 | |||||||
| 10% return | Rs. 10,000 | 30 years old | 35 years old | 40 years old | 45 years old | 50 years old | 55 years old |
| A | Start age 25 | 780824 | 2065520 | 4179243 | 7656969 | 13378903 | 22793253 |
| B | Start age 35 | 0 | 0 | 780824 | 2065520 | 4179243 | 7656969 |
So, you can see how much of a difference even 10 years can make. Thus, the earlier you start investing in a mutual fund, the more wealth you create over your lifetime.
More and more people are investing in mutual funds due to their ability to provide diversification, giving access to a broader range of investments than an individual investor could afford. This diversification helps investors overcome financial barriers and achieve their personal and career goals.
One of the best ways to invest in mutual funds is through a SIP or Systematic Investment Plan. With SIPs, you purchase more units at lower NAVs and fewer units at higher NAVs, which helps average out the cost over time, known as Rupee Cost Averaging.
This method makes SIPs an effective risk management tool for long-term investors, helping them navigate market fluctuations and build wealth steadily.
There are two primary ways to invest in mutual funds:
1. Systematic investment plan (SIP) -
SIP allows you to invest a fixed amount of money at regular intervals, typically monthly. This method benefits from Rupee Cost Averaging, where you buy more units when prices are low and lesser units when prices are high, reducing the average cost over time.
SIPs are ideal for long-term investors as they promote disciplined investing and risk management. For example, investing Rs. 1,000 monthly in a mutual fund scheme can accumulate significant wealth over the years due to the power of compounding.
2. Lump sum investment -
This method involves investing a large sum of money at once. It's suitable if you have a substantial amount to invest and want to deploy it in one go. Lump sum investments can be more rewarding during market corrections when asset prices are lower.
Both methods have their advantages and can be chosen based on individual financial situations and investment goals.
Here are some of the best mutual funds to invest now in India.
| Mutual fund name | Three-year returns |
| Canara Robeco Bluechip Equity Fund - Direct Plan-Growth | 18.55% p.a. |
| Quant Multi-Asset Fund | 25.63% p.a. |
| PGIM India Flexi Cap Fund | 22.02% p.a |
| ICICI Prudential Thematic Advantage Fund (FOF) | 17.55% p.a |
| IIFL Focused Equity Fund - Growth | 19.82% p.a. |
| Axis Midcap Fund | 18.2% p.a. |
| Axis Banking and PSU Debt Fund | 8.95% p.a. |
Additional Read: Investment when market is high
There is no time better than today to start investing in mutual funds. The sooner you begin your investment journey, the more rewarding it is bound to be. Make informed decisions by keeping a watch on the market, comparing different schemes, and conducting thorough research on what they offer. Get Tata Capital’s Moneyfy app today and choose the right scheme according to as your goals, risk profile, and more.
Thematic funds are ideal for long-term investment goals, typically over five years. They focus on specific themes like technology or sustainability. Regular monitoring is recommended to take advantage of any short- or medium-term opportunities that may arise.
A thematic fund is a mutual fund that invests in companies related to a specific theme, such as technology, infrastructure, or sustainability. These funds aim to capitalise on long-term trends within the chosen theme.
Thematic funds often offer higher potential returns but come with increased risk due to their concentrated focus on specific themes or sectors. They are more suitable for long-term investors who can tolerate market fluctuations and higher volatility.
Focused funds invest in a small, carefully selected group of securities, aiming for high returns through concentrated investment. In contrast, thematic funds invest in a broader range of stocks based on a specific theme without restrictions on the number of stocks.
An example of a thematic investment is ESG Mutual Funds. These funds invest in companies that adhere to strong environmental, social, and governance (ESG) criteria. They focus on socially responsible investing and evaluate companies based on their ESG practices.
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05 September 2024
7 mins read
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