When to invest and when to exit?
The answer to this will solely depend on the investor. There are two modes of mutual fund investments—Systematic Investment Plan (SIP) and lump sum. If an investor is uncomfortable about making lump sum investments, they can always opt for the SIP mode. This allows people to invest in mutual funds in a regular and disciplined manner.
Financial experts state that people can start investing whenever they wish to. Generally, starting one’s investments earlier is recommended because it helps to create a substantial corpus. There is no ideal time to exit mutual funds as it varies from one individual to another. The duration for which one remains invested depends on one’s financial goals, investment horizon, risk appetite, etc.
You can find over 1200 mutual fund schemes on the Bajaj Finance platform with value research ratings and information about the exit load and expense ratio of each fund for you to make a more informed decision.
Things to keep in mind for investing in long-term funds
Before starting a long-term investment in mutual funds, one should consider the following things:
Investors need to have a proper investment strategy to reach their life goals. They must take their risk-taking capacity into account before formulating one. Furthermore, they need to be disciplined enough to stick to the investment strategy.
A person needs to conduct thorough research to identify the best mutual fund for long-term investment.
It is advisable to undertake a comparative analysis because it helps in understanding how a certain fund has performed against its benchmark and peers.
It is important to be patient to earn returns from long-term mutual fund investments.
Always check the Riskometer tool on our website before investing in a fund. The tool stipulated by SEBI reflects the current risk of the scheme at a given point of time.
Who Might Consider Long-Term Investment Strategies?
Investors with a long-term financial horizon, typically ranging from several years to decades, may consider long-term investment strategies. These investors are often focused on wealth accumulation for major life goals such as retirement, buying a home, or funding their children's education. They are generally willing to endure market volatility, as they have time to ride out market fluctuations and benefit from the power of compounding. Long-term strategies often involve equity-oriented mutual funds, which have historically shown the potential for significant growth over extended periods.
Short-term investment in mutual fund
When someone invests for tenure between a few days and 1-3 years, it is known as a short-term mutual fund investment. Ultra-short-term debt funds and liquid funds are examples of short-term funds. These are better alternatives to fixed deposits as they offer better returns. But they are subject to market risks.
Things to keep in mind before investing in short-term funds
Investors who don't mind taking on some interest rate risk in exchange for better returns can start with short-duration funds.
In general, these funds produce reliable short-term incomes. However, if interest rates unexpectedly fluctuate, fund prices may experience significant volatility.
When a short-term fund is redeemed after being held for more than three years, the benefit of indexation kicks in, resulting in lower taxes for investors.
Who Might Consider Short-Term Investment Strategies?
Short-term investment strategies are suitable for investors with immediate or near-future financial needs. These could include building an emergency fund, saving for a short-term goal like a vacation, or having cash readily available for unforeseen expenses. Such investors prioritise capital preservation and liquidity over long-term growth. They often choose debt funds or money market funds, which are less volatile and offer quicker access to funds. Short-term strategies focus on minimising risk and maintaining the value of invested capital rather than significant wealth appreciation.
Short term vs long-term in mutual funds
Here are some of the differences between short-term and long-term investments in mutual funds:
To sum up, people need to check their financial goals, and risk appetites and choose long-term or short-term mutual funds accordingly. Financial experts advise people to start investing as soon as possible as it helps to build a substantial corpus by the time one retires. To get more information on mutual funds and start your investment journey, download the Bajaj Finance app. The app also helps you with tools to manage your investments and hence is a one-stop solution to your investment needs.
Calculate your expected investment returns with the help of our investment calculators