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Invest in MFs
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Should you invest in MFs when the markets rise?

 

Any day is a good day to start with your mutual fund investments or stay invested if you are an existing investor.

The key to creating wealth with mutual funds is to stay invested for the long term. The most experienced investors worldwide do not try to time the market. This is because markets go through cycles. Returns earned during market upcycles are averaged out with returns in downcycles.

Consistent investing through various market phases will give you the desired results over the long run. When the market is down, your Systematic Investment Plan (SIP) will buy more units; when it is up, you will get fewer units via SIP. This strategy, known as rupee cost averaging, is one of the biggest strengths of SIPs.

To know more about investing in SIPs, click here

Here is an example of rupee cost averaging:

Suppose you invest Rs 10,000 via a SIP for six months. Here’s how the concept of rupee cost averaging will play out.

In the first month, the mutual fund’s unit price is Rs 100 per unit. At this rate, you’ll get 100 units. In the second month, the price drops to Rs 90 per unit, and you get 111.11 units. Similarly, the price may fluctuate going forward, and you get 85, 105, 110, and 95 units in the next four months. Now, here is how the average cost per unit over the six months will look like:

Total Investment: Rs 60,000

Units acquired: 100 + + 111.11 + 85 + 105 + 110 + 95= 606.11

Average cost per unit= Total amount invested/Number of Units Acquired

= 60000/606.11 = 98.99

This example illustrates how investments made at a time when markets are soaring ultimately average out in the long run. But it’s important to keep investing consistently to reap the benefits of compounding.

To calculate the wealth you can accumulate over the years, visit our SIP calculator

Pausing or postponing SIPs or trying to time the market through only lump-sum investments may result in missed opportunities and lower returns over the long term. Stopping SIPs can also weaken your commitment to regular investing, make you less motivated, and make it harder to get back on track with your investment plan. It can disrupt your momentum and prevent you from reaching your goal of building wealth.

While evaluating your mutual fund portfolio from time to time is a prudent practice, deciding to stop or postponing your decision to invest because the market is at an all-time high may not be wise. Over the long term, markets tend to move higher, surpassing previous highs.. Besides, it is tough, even for seasoned investors to time the market. There is a saying, “Time in the market is more important than timing the market.” Also, no one can say with surety if an all-time high will never be crossed to make another high.

Therefore, halting SIPs or delaying your investments when the market is soaring will derail your mutual funds investment journey. For long-term wealth generation, it is essential to stay consistent and continue investing despite market conditions or begin investing if you have not already!

If you plan to invest in mutual funds, you can invest via the Standard Chartered Invest ( SC Invest) on SC Mobile app or Standard Chartered website . If you need any further assistance, reach out to our Wealth managers for assistance. Click here to schedule a call back