Mutual Fund investments: 5 ways to invest in the bull market

A mutual fund means a fund established in the form of a trust to raise monies through the sale of units to the public or a section of the pubic under one or more schemes for investing in securities, money market instruments, gold or gold related instruments, real estate assets and such other assets. In case of a first-time investor in mutual funds, you need to formulate an investment strategy to diversify your investment which may help to generate long term risk adjusted return. A stock market on the bull run seems an exciting moment to invest, but one needs to be patient while investing in the market.

You can follow the following strategies while investing in mutual funds when the market is high.

1. Review your portfolio: When you initially constructed a portfolio, the markets must have been quite different. Currently, you may be cautious of market behaviour. This is a good time to assess your mutual fund investments and make a comparison of the mutual funds. If you have been investing in equity funds, you can transfer some of your mutual fund investments to debt funds to protect mutual fund investments from volatility.

2. Goal evaluation: It is essential to revaluate one’s goals at regular intervals. Newer goals will help you to invest your money efficiently. If you were an aggressive investor in the past, now you can follow a slightly conservative policy. Your mutual fund investments should be in line with your financial goals. Make a comparison of various mutual funds and choose a mutual fund based on the terms and risk profile of the goal.

3. Stick to SIPs during market high: Investors who are not aware of the market dynamics should go in for systematic investment plan(SIP) in mutual funds. When one invests a certain amount in a fund at regular intervals, one buys more units when the price is lower and lesser units when the price is higher. This is called the ‘rupee cost averaging’ method.

You can use a mutual fund calculator which is a financial tool that helps you calculate the returns from the mutual fund investments. You can thus determine the maturity value of an investment if you invest a lump sum amount or use the SIP route.

4. Choose funds as per your investment profile: Financial goals and risk tolerance should be the priority of every investor. It is essential to invest as per your risk profile and market levels should not hinder your financial goals.

For example: if you invest in mutual funds aiming to finance your retirement years after around 25 years, a sudden spike in market levels should not stop you from investing. You should keep investing in whatever funds you have invested in.

A mutual fund calculator is important because you can calculate the returns based on assumed rate of returns on investments.

5. Do not try to time the market: Every investor has done this at some point. Not only does it result in missed opportunities, but can also lead to wrong choices that hamper the growth of your portfolio.

Finally, be lion-hearted and invest in the market. The rise and fall in stocks is fundamental to market behaviour. A good financial advisor can come up with a good investment plan that can help you to create wealth in the long term.

Mutual Fund Investment for the First Time Investor

For a beginner, investing in mutual funds can seem a difficult task. Understanding the meaning of mutual funds and how mutual funds work is the first step in the investment journey.

A mutual fund means a fund established in the form of a trust to raise monies through the sale of units to the public or a section of the pubic under one or more schemes for investing in securities, money market instruments, gold or gold related instruments, real estate assets and such other assets

Depending on the schemes objective, the money collected from investors is invested in various categories such as stocks, gold, bonds and other securities. A fund manager whose main aim is to follow scheme objective and try to generate alpha on the fund’s investments manages each fund.

If you are a first time investor you should consider your financial goals, your investor profile viz, are you looking for short term investments or are you aiming at building your wealth over long term? You should also look towards diversifying your portfolio by investing in different mutual funds.

Beginners can begin their investing via systematic investment plans (SIP) especially if they are investing in equity instruments for the first time. A lump sum investment can be risky if the stock market is at its peak.

SIP allows you to spread your mutual fund investments over time and invest across market levels.

A mutual fund calculator is a financial mechanism that enables investors to calculate the estimated returns on their mutual fund investments.

A mutual fund calculator guides you in your future planning based on estimated returns.

An SIP calculator is a financial device that enables investors to calculate the expected returns on their SIP investments. With the help of this tool, you can calculate how much of mutual fund investment is needed to achieve the target corpus.

Investments in mutual funds can be made online or offline. However, bear in mind that you should be KYC compliant to invest in a mutual fund. This means, you need a PAN card and valid address proof.

One can invest in mutual funds through RIA or directly with the asset management company (AMC) in the direct plan. You must complete your KYC formalities online. You will also have to complete the IPV (In-Person Verification) by SEBI-approved agencies.

Mutual fund investments can be made through a mutual fund distributor by opting for a regular plan. The mutual fund house pays a commission to the mutual fund distributor or the intermediary.

You can also invest in direct plans of mutual funds online through the website of a fund house. You need to complete your KYC (Know Your Customer) compliance and then invest in the mutual fund scheme of your choice.

Mutual funds are one of the effortless way of investments. It helps to potentially grow your corpus in the long term. For this, plan your goals, through mutual fund comparison select the appropriate funds and start investing.

When should you redeem SIP Investments?

SIP meaning full form is a systematic investment plan (SIP). The meaning of SIP in investment is the most convenient mode of investing in mutual funds and has potential to generate long-term wealth. The investor develops the habit of disciplined investing and reaps the benefits of rupee-cost averaging. However, are subject to losses on account of market conditions and associated risks involved. What should an investor do? Should investor stop a loss-making SIP or continue with the SIP?

The following factors should be considered while redeeming SIP investments.

Asset allocation

This is a very important to meaning of SIP investments. Returns from equity-linked mutual funds are related to the performance of the stock market. So, if the market is not performing well, then your fund is also likely to follow the trend and provide low returns. Also, in equity funds, investing one’s funds in small or mid-cap funds or large cap because previous year returns were very good is not a good idea. Allocate your assets in a diversified manner. It should mostly be a mix of long-term, mid-term and short-term funds. Asset allocation varies from person to person. Investing in only one type of fund is not advisable.

When to withdraw

This is a dilemma faced by al investors. The answer lies in your fund performance. Follow the performance of the fund you have invested in. If the fund is not performing satisfactorily for less than a year, it could be the market fluctuation affecting it but if the performance is unsatisfactory for more long period than, you should consider looking for a better fund.

Apart from the performance parameter, you should also check the portfolio of companies in which the fund has invested and their prospective performance. Another good strategy is to compare your mutual fund’s performance with similar mutual funds. So be careful when you decide to redeem your SIPs investments and identify alternative funds.

Investment horizon

The longer one invests through SIPs in mutual fund has potential for long term risk adjusted returns. Generally, consider investing in SIPs for a period of five years or so. It has been observed that generally it takes at least five years to average out the losses and market risks and the power of compounding. A market correction phase does not mean one should redeem those funds. Rather, view it as an opportunity to purchase more funds at a lower price.

To conclude, one can suffer losses while investing in mutual funds but there is no need to panic and make a hasty decision. There could be many reasons such as elections and geo-political tensions, recessions, pandemics, etc. The economy has seen it all and still flourishes and thus investing is a long-term game and should be treated accordingly.

So finally, to answer the main question as to when is the right time to redeem SIP investments, ideally one should look at redeeming SIP investments only when the financial goals are achieved. If an investor wishes to take advantage of changing market dynamics, satellite portfolio could be used to switch to funds depending on market behaviour.

Should You Invest in SIPs when the Market Is Rising?

As a new investor if you wish to invest in mutual funds or make new investments to achieve your financial goals, then you would have wondered if this was the right time to invest in SIPs.

Investors generally believe that if they invest in rising markets, they will earn lower returns because further growth may be limited.

The meaning of SIP in mutual fund is that you invest a certain amount at regular intervals on a weekly, monthly, quarterly or bi-annual basis.

Any time is a good time to start investing through an SIP in mutual fund meaning as long as you invest regularly despite the market conditions. Timing the market can be a meaningless activity as it is challenging to predict market behaviour.

Investing via SIP in mutual fund means timing the market becomes futile and you can focus on ‘time in the market’. When you invest in SIP meaning investment, you acquire more mutual fund units when prices are low so when the market rises, it results in higher returns. When prices are high you acquire fewer mutual units when prices are high. This lowers your average investment cost over a period. However, one should note that investing in SIP are subject to market risk and do not assure a profit or returns or protection against a loss in a downturn market.

It is important to consider the following factors to get the best out of your investment:

1) Select worthy schemes

Different mutual fund schemes have different investment strategies, objectives, risk profile, etc. Select schemes that meet your financial goals, risk profile, and investment objective. Also consider qualitative parameters like the efficiency of the mutual fund house’ systems and processes, the fund management team, and portfolio characteristics. Once you have determined your requirements, select the mutual fund scheme by examining risk-reward parameters. Do not be fixated on the fund’s past performers because past performance is no indicator of future returns.

2) Invest the right amount

Though the mutual fund scheme is good, you could fall short of reaching your goal, if you do not invest a sufficient amount. The amount to be invested regularly will depend on your desired corpus as well as the investment goal. Use an SIP calculator to calculate returns to be earned on the investment amount meant to receive from SIPs. You should adjust the investment amount for inflation.

3) Ignore the market noise

Erratic market conditions can make investors nervous about investing further. You may decide to stop or redeem your SIP investment whenever the market turns volatile. However, you can partake of the benefits of SIP investment meaningfully only if you invest regularly despite the market conditions.

If you stop SIP or miss instalments, you might forgo the advantage of compounding and thus miss your investment target. Therefore, it is important to continue investing till you meet your goal.

To conclude

Keep in mind that equity investments take time to grow. In case of SIP, give each instalment sufficient time to grow and generate long term risk adjusted returns. As you start approaching your goal, gradually reduce your equity exposure to invest in a more stable and less risky investment avenue, such as debt mutual funds and bank deposits.