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Which is the Best Time to Invest in SIP

Today, more and more investors are looking at mutual funds as a viable investment option. Though mutual funds are getting popular, a question that new investors wonder about is the right time to invest in mutual funds. Is there a right time and if yes, when is it? Read on to find the answer.

Investing in mutual funds comes with many benefits. They are flexible, offering significant diversification to reduce risk, and are managed by professional. Though there are many advantages, there are also concerns about mutual funds. One of them is trying to find the right time to start investing. It is not just about the right time but also the factors that play a role in deciding when to invest in mutual funds.

Is There a Right Time to Invest in Mutual Funds?

Investment Amount

Mutual funds should be considered as any other investment plan. It means whenever you feel the need to invest, you should go ahead.

Since mutual funds are subject to market risks, investors often try to find the best time to invest in mutual funds. While there are many theories about the best time, most experts will tell you otherwise.

However, here are a few situations that are considered favourable for investing in mutual funds are:

  • When the market is low or is going high

  • When bonds yield high returns

  • When the real estate sector isn't performing well

While each of the above scenarios is fine, you should not consider them as the best time to invest in mutual funds. There isn't any 'best' or 'most suitable' time when it comes to investing in mutual funds. Any time you are ready to invest, it is the right time. With mutual funds, it is more about how and where to invest rather than when to invest.

The Two Main Modes of Mutual Fund Investment

There are two ways to invest in mutual funds:

Lump-Sum Investment

As the term suggests, it is investing a large amount at one go. It is ideal for those who have a disposable amount.

The Right Time to Invest a Lump Sum Amount

  • When You Receive a Large Sum:

    Keeping your money idle does not help it grow and hence, it makes sense to invest it in a mutual fund scheme. The point to note here is that you should be able to stay invested for an extended period to make real gains.

  • Getting Tax Exemption Under Section 80C:

    Investing in mutual funds such as ELSS or Equity-Lined Savings Scheme can get you a tax deduction. So, if you are looking to save your taxes, you can start investing in MF during the tax filing season.

  • You can Afford to Wait for a Few Years:

    If you want to know the right time to invest, then it is when you have the money. When you invest a lump sum amount in mutual funds, you will have to prepare yourself for a lock-in period, which could vary from 3 years to more.

  • NAV Factor:

    Though many consider the NAV (Net Asset Value) of the funds while investing, experts say it is not a reliable decision. NAV may help but buying many funds with lower NAV may not guarantee high returns. It is the choice of funds that will determine the returns and not the NAV alone.

SIP Investment

SIP or the Systematic Investment Plan is a mode of investment where you can invest a fixed amount at specific intervals. SIP investment is one of the best ways to invest in mutual funds as anyone with a regular income can invest in mutual funds.

Is it the Right Time to Invest in SIP?

  • When You Want to Invest But Do Not Have a Large Fund:

    With SIP, you can investing with a small amount as Rs.500 every month in a mutual fund scheme. So, anyone, a student, homemaker or a professional, can start investing. So the best time to invest in sip is when you are ready.

  • When You Want to Invest in Mutual Funds But Are Cautious:

    SIP is suitable for those who want to test if mutual funds are right for them. By investing small amounts regularly and tracking returns, you can find if the investment is helping you with your financial objectives.

  • When You Do Not Wish to Take a Risk:

    Mutual funds and risk go hand-in-hand, but SIPs spread out the risk over a period and reduces the risk. The longer your investment, the lesser is the risk. That is why the best time to start sip is when you are fine with the investment period.

Invest When You Are Ready

Investing in mutual funds can help you manage your financial objectives, but the key is to make the right choice. As for the right time, it is always NOW!