An age-old Chinese saying states that ‘The best time to plant a tree was 20 years ago. The second-best time is now’. There is no real reasoning to why you should delay your investments, particularly in mutual funds. They have gained a lot of ground among investors, owing to their ability to offer inflation-beating returns along with a variety of schemes to choose from depending on one’s financial goals.

When is the right time to start investing in mutual funds?

Ideally, there’s no time as such. However, you should start investing in mutual funds as soon as you begin to earn. That being said, it is imperative that you do your due diligence and have the required know-how in order to invest. Being an early bird in mutual fund investment gives you more time to compound your wealth in the long run.

Note that the funds that you wish to invest in can be determined by a number of factors, including your personal goals and other financial objectives. Prior to investing in a fund, it’s important to consider:
  • Your risk appetite

    Note that all mutual funds don’t carry the same levels of risk. Equity funds, which invest in stocks, carry a higher element of risk than debt funds that primarily invest in money-market instruments. If you have the stomach for risks, you can opt for equity funds. On the other hand, if you are a conservative investor, you can opt for debt funds.

    However, should you want to maximise your gains in the long run, you can consider equity funds that have the potential to deliver high returns than debt funds.

  • Investment horizon

    In simple words, your investment horizon refers to the period of time you are willing to stay invested. The likelihood of earning higher returns increases should you decide to stay invested for the longer haul. Should your investment horizon exceed 5 years, you can consider investing in an equity-oriented fund that has the ability to deliver superior inflation-beating returns.

  • Financial goal

    A goal-based investment approach in mutual funds will help you zero-in on the right fund. For instance, if you want to save for a rainy day or an emergency, you can invest in a liquid fund that is a better alternative to a bank savings account.
On the other hand, if you are looking to accumulate wealth for retirement, you can invest in equity or hybrid funds. Similarly, for saving taxes you can opt for equity-linked savings schemes (ELSS).

In conclusion, investing in mutual funds and getting it right has got more to do with the funds that you choose as well as the mode of investment that you wish to adopt. A little due diligence on your part can go a long way in making an informed choice.

Explore Various Mutual Funds here.

DISCLAIMER 
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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