Mutual funds can be termed as an investment vehicle that brings together the contributions of various investors. These funds are pooled and then managed by professionals and invested jointly in assets to obtain maximum profitability. The funds collected are usually invested in a broad portfolio of assets such as bonds, stocks, derivatives, commodities and much more. Each investor is a unit holder in the said mutual fund and is paid periodic returns according to the performance of the fund. All funds are born with a certain investment philosophy, which specifies the distribution of assets in the portfolio. The risk profile will determine the fund’s exposure to equity or fixed income schemes. Just as there are shareholders of a company, the investors in the mutual fund, through their contributions obtain a certain share or units in the fund. An investor can enter the fund at the time of their incorporation or at a later date and can exit the fund obtaining the returns on the investment at any given time.
Selecting a Mutual Fund
Mutual funds are regarded as the best way for a layman to invest and profit from the stock markets. As the fund is managed by experienced fund managers the investors don’t have to worry about things such as research, risk-management and balanced portfolio creation and more. The said are done by professionals on behalf of the investors. There are few obvious factors that make mutual funds especially those who invest in the equity market lucrative or not. Things such as recent past performance of the stock market, outlook of the near future, overall health and growth of the economy of the country and much more play their part. One more factor which many people deem as very important is timing of the entry in to the market or the fund. Potential investors worry whether or not the markets have peaked-out or are due for a correction, what will happen if just after they invest the market plunges?
Minimizing risk associated with Mutual Funds
Such risks are negated by the functioning of the mutual funds. The management company is responsible for diversification of the fund and the portfolio alike, many investors seek to reduce risk by creating a portfolio of products that they consider to be ‘quality’ and in line with their expectations of expected volatility and profitability. So, what is the best time to invest in mutual funds? Well it is said that the best time was 10 years ago and the second best time is now. If you are looking to invest for a longer term then you really don’t have to worry about things like market fluctuations. It is said that time in the market is always more important than timing the market. If you are looking to invest on a short term basis or looking to make a quick buck in the market then there are several factors which have to be considered and when to invest in the mutual fund being one of them.
Best time to invest in a Mutual Fund
There are both pros and cons of investing in the market when it is down and also when it is up. Much depends upon your financial goals, if you are looking to invest with a short to medium term investment horizon, it’s best to invest when the market is down and a rally is expected in the near term. It is a given fact that maximum benefits can be availed to when an investor invests on a long term basis. It is mighty difficult for anybody to time the market. Thus another ideal option is investing in Mutual Funds through SIPs offered by various financial institutions. A potential investor has to work out his financial goals and appetite for risk and plan and select a fund accordingly. Market volatility is a factor and will remain a factor but the same can be negated by making the right choices.