Author
Anmol Gupta
Typically when markets go down, people start panicking and start selling their shares or units of mutual funds.
There is another set of people who ask if that’s the right time to invest in stock markets or mutual funds?
Well, the idea of investing when markets are down has got some merit. You get to purchase more number of shares or more number of mutual fund units when markets are down. Hence, you will acquire more for less and when the prices rise, you will make more profits.
There is nothing wrong in the plan, right?
Well, the thing to be concerned about is what happens if the market go down even further? It’s very much possible. You can’t predict markets. Timing the market is not easy. Nobody can predict the market movements. Hence, instead of focusing on timing the market, one should be disciplined and should keep on investing in equity mutual funds irrespective of the market fluctuations. In the long term, these short term fluctuations do not affect your investments. With overall growth of the economy in long run, the equity markets also grow absorbing all the short term fluctuations.
So, you should also invest in Mutual Funds when the markets are relatively down, and not just invest when markets are down as what you will never know for sure whether the markets are temporarily down or they are going to dip even further? For these reasons, Systematic Investment Plan (SIP) is highly recommended mode of investments in equity mutual funds. You should focus on your day to day work and let your money work for itself. Tracking your long term equity mutual fund investments on daily basis is not going to help :)
And how about investing in Mutual Funds when markets are up?
Well, the answer to it remains the same. You just don’t time the market. Be disciplined and keep investing. What seems high today might seem to be lower tomorrow if the market goes up even further. Some people fear that markets will crash if they are at all time high and hence they should not invest at that time. As long as you are investing money systematically in all market conditions, you should be fine in long term.
So, to conclude, don’t think about markets going up and down everyday. Have faith in your Mutual Fund Managers and Investment Advisers, and keep on investing regularly.
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About the Author
Anmol Gupta
Anmol is CEO at 7Prosper. He is SEBI Registered Investment Adviser, with expertise in Finance and Technology domains. Anmol is committed to help people achieve their financial freedom.
FAQs
You can't predict markets.
Is it best time to invest in mutual funds when market is down? ›
There is no better time to start investing. It is very difficult to time the markets and although the markets are due for a correction, it would not be wise to wait further. Also, when it comes to SIPs, there is not much merit in timing the markets. We would suggest you invest in different mutual fund categories.
Should I invest when the stock market is down? ›
By continuing to buy shares when the market is down, you may lower the overall price you pay per share and position yourself for growth when stocks inevitably recover. But remember: This recovery isn't instant. It may take months or even years.
What to do with mutual funds during market crash? ›
Approach to Mutual Fund Investment During a Crash
You need to stay invested and take advantage of rupee cost averaging. Markets have rewarded those who have not pulled out of their investments. For example, when markets fell 38% during the 2020 Covid crash, some funds compounded investors' wealth by 14% or even more.
Which mutual funds to buy when the market is down? ›
- Federal Bond Funds. Several types of bond funds are particularly popular with risk-averse investors. ...
- Municipal Bond Funds. Next on the list are municipal bond funds. ...
- Taxable Corporate Funds. ...
- Money Market Funds. ...
- Dividend Funds. ...
- Utilities Mutual Funds. ...
- Large-Cap Funds. ...
- Hedge and Other Funds.
What is the best time to invest in Mutual Funds? There is no rule of thumb or fixed criteria to state the best time for investing in mutual funds. While a bear market may look like an ideal time to invest in mutual funds, the identification of a bear market entirely depends on the expertise of the fund manager.
Is it worth to invest in mutual funds now? ›
Mutual fund investments when used right can lead to good returns, keeping risk at a minimum, especially when compared with individual stocks or bonds. These are especially great for people who are not experts in stock market dynamics as these are run by experienced fund managers.
What is the safest investment if the stock market crashes? ›
Government bonds and defensive stocks historically perform better during a bear market. However, most people investing for the long term shouldn't be aggressively tweaking portfolios every time there is a sell-off. The best way to go is to build a well-diversified portfolio and stick by it.
Should I sell mutual funds before a recession? ›
No, you shouldn't sell your mutual funds before a recession. Even if you're uncomfortable with the market price decline, overreacting and selling mutual funds at a loss when there is a market drop or recession isn't a sound strategy. It's best to set aside cash for use during recessions and before a market downturn.
What to buy when the market is down? ›
Market crash buy stocks
| S.No. | Name | CMP Rs. |
|---|
| 1. | West Coast Paper | 631.95 |
| 2. | Andhra Paper | 526.70 |
| 3. | Radiant Cash | 85.95 |
| 4. | Expleo Solutions | 1302.15 |
23 more rowsNo, a stock market crash only indicates a fall in prices where a majority of investors face losses but do not completely lose all the money. The money is lost only when the positions are sold during or after the crash.
Has anyone ever lost money in a money market mutual fund? ›
However, this only happens very rarely, but because money market funds are not FDIC-insured, meaning that money market funds can lose money.
Do mutual funds go down during a recession? ›
A stock fund, either an ETF or a mutual fund, is a great way to invest during a recession. A fund tends to be less volatile than a portfolio of a few stocks, and investors are wagering less on any single stock than they are on the economy's return and a rise in market sentiment.
Where is your money safest during a recession? ›
Where to put money during a recession. Putting money in savings accounts, money market accounts, and CDs keeps your money safe in an FDIC-insured bank account (or NCUA-insured credit union account). Alternatively, invest in the stock market with a broker.
What month is best to buy mutual funds? ›
There is no particular right time to invest in SIP. However, it is always advisable to start as early as possible. Mutual funds generate better returns in the long run. The longer you stay invested the more returns you can earn through capital appreciation and dividends.
What was the safest investment during the Great Depression? ›
Many people who owned stocks that went down a lot would have been OK eventually, except they bought on margin and were ruined. The best performing investments during the Depression were government bonds (many corporations stopped paying interest on their bonds) and annuities.
Which date of the month is best to buy mutual funds? ›
There is no specific date of the month that gives better SIP returns. So, your own convenience should be the only determining criterion. For example, if you are a salaried person and receive your monthly pay at the end of the month, then you can plan your SIP in the first week of the following month.
What time of day is best to buy mutual funds? ›
There is no best time as such for investing in mutual funds. Individuals can make investments in mutual funds as and when they wish. But it is always better to catch the funds at a lower NAV rather than higher price. It will not only maximise your returns but also lead to higher wealth accumulation.
