One of the biggest lies told in the history of humankind is one's ability to time the market. While movies like Big Short based on the housing bubble might make it seem like a handful of nerds can see the future, the truth remains that the market is unpredictable, and one can’t predict the shocks Sensex gives or the nerves that Nifty hits.
Now, the elephant in the room is ‘when should I invest in mutual funds? Short answer, now! But the heart wants what it wants, so keep reading for the lengthier one!
While the market themselves aren't predictable, some indicators can be considered before investing in a mutual fund.
While larger AUMs in equity funds could mean its inability to sell the stocks at a market crash, it can also be seen as a fund’s trustworthiness amongst the investors. Beta Ratio - The beta ratio for a stock implies its movement concerning the market. In the case of a mutual fund, this ratio is calculated by taking the weighted average of underlying stocks. A beta ratio<1 means that the stock is less volatile, while one with>1 implies that the stock grooves to the tunes of the market.
This is a phrase that every GenZ, regardless of their sense of markets, must have heard in these preceding months. Let us give you another mantra, buy irrespective of the market. As bad as this advice might seem, this is how you can lower the risk profile of your investment while exploiting the power of compounding. This is the point where we introduce our good old friend SIPs, which we may even begin to call the Smartest Investment Plan. SIP averages out any dips and booms in the market, and the chances of buying a fund at an exorbitant NAV reduce significantly.
Prophecy, intuition, calculation!
We never said it’d hit the mark tomorrow, next week or even next year, but it’ll sure do. The point we try to make here is that regardless of when you enter the market, time spent in the market rewards the investors.
Don’t take our word for it, have a look at some charts…
US’ 2008 subprime crisis might be one of the worst nightmares of an investor, seeing your portfolio go down the drain in a night… we can only imagine. However, the silver lining here is that markets regained themselves within a year, and even after all the crises, we stand today at a Sensex level of 52,793.62(at closing on 13/05/2022).
To sum it up, there’s probably no one on earth who can predict the market levels to the decimal, and neither does an individual exist who can indicate how long a boom or collapse is going to last. So, the best way to see your pennies grow is to let them out in the sunshine called time.
We’ll be back with some more finformation.
Till then, Stay Safe! Invest Safer!!
Assets Under Management refers to the assets held by the fund on behalf of its clients or investors. While the calculation may vary from company to company, it indicates how large a fund is.
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