The Right Time to Invest in Mutual Funds After Demonetization

There is no good or bad time in investing in mutual funds, provided you are going to be there for a long duration. Start a SIP (Systematic Investment Plan) and enjoy the investments.

Demonitization and Its Irrelevance to Mutual Fund Investing

Demonitization had nothing to do with it. Seriously, just read this. The actual reason for the increase in mutual fund investments is the equity rally that has been ongoing for the past four years, making many early investors rich. Another reason is that interest rates on fixed deposits have reached new lows. Real estate prices have also failed to move up, making it a poor investment choice, while gold has not shown attractive growth.

Why You Should Invest in Mutual Funds

So, should you invest in mutual funds? Definitely. However, mutual funds are not limited to the stock market; there are many different avenues for investment. Do not be misguided into investing in the wrong product and then regret it.

Irrelevance of Short-term Market Movements

Have you had a similar question when elections take place, floods strike, the RBI governor changes, a terrorist attack happens, or agriculture suffers because of bad rains? Most of these are irrelevant to long-term investments in mutual funds. If you plan to benefit from short-term market movements, some of the answers you have already received are relevant. There will be a short-term impact, but you can use it to add to your holdings for the long term.

One very boring but overused quote from Warren Buffett is, “Be greedy when others are fearful and vice versa.”

Tips for Investing in Mutual Funds

You can start investing in mutual funds at any time. However, it's crucial to note that during any dip, the NAVs of the funds get reduced. This provides you with an opportunity. Mutual Funds usually provide 12–18 compounded returns over longer terms. Therefore, whenever the market takes a dip, if you can add an extra SIP during that month or two, it will increase your investment size at far better rates.

Moreover, in mutual funds, the averaging of NAVs is happening continuously whether you invest through extra SIPs or new investors join. The returns for a single month may be negative, but mutual funds are long-term investments.

Demonetisation is positive for markets. It has led to increasing liquidity in the market, driving positive changes. Despite short-term volatility, the market's fundamental improvements continue to support long-term investors.