The Sensex and Nifty are at lifetime highs. The Sensex on Monday closed at a fresh lifetime high of 31,109. The Nifty closed above 9,600 for the first time ever. Already you and several of our citizens are talking of Nifty scaling the magical peak of 10,000. The biggest question on your mind? Is this the beginning of a bull run or is it the end?
Investing directly in the stock markets can be very risky. You require to do your research and have a sound understanding of the stock market. It's time to turn towards an investment in equity mutual funds. The only question...Should you invest in equity mutual funds when the Sensex and Nifty are at lifetime highs?
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Why is it a good time to invest in equity mutual funds?
India has shrugged off the problems faced due to demonetization. It is getting ready for a period of rapid growth. Prices of potatoes, onions and pulses have fallen sharply. Inflation is well under control. With normal monsoons forecast this year and April CPI Inflation at 3%, the stock markets are booming. GST a game changer in the economy, is just round the corner.
This is what financial advisors tell you....This is a great time to invest in equity mutual funds. Invest in equity mutual funds via SIP's.
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1. Do not stop your SIP's
This is a great temptation. The stock markets are at all- time high's. You say...Let's stop investing in equity mutual funds via SIP's. Let the stock markets crash. Then you will restart SIP's. For those who don't know, Systematic investment plan also known as SIP, is a method of investing in mutual funds. You invest a certain pre-determined amount, (amount you have decided beforehand), at regular intervals of time, in the mutual fund. This might be once each week, once each month or once in a quarter.
The very moment you stop or pause your SIP's, you are timing the market. This defeats the purpose of investing in equity mutual funds via SIP's. It's impossible to predict stock market movements. Stock markets have dips and corrections, volatility and of course, moments of glory. You can benefit from stock markets only if you stay invested in them.
See Also: Sensex Historical Data
An SIP in equity mutual funds is the best way to invest in the stock market, even if it is at all-time highs.
2. There are opportunities even when stock markets are high
Yes, the stock markets are at all-time highs, but opportunities to make good investments still exist. There are still a lot of opportunities in different sectors which are yet to be tapped. It is the job of a good fund manager to find these opportunities. Sometimes in spite of the Nifty and Sensex reaching all-time highs, certain sectors are ignored. A good fund manager finds value in these beaten down or ignored sectors.
Invest in a good equity mutual fund scheme even when the Nifty and Sensex are at all-time highs. A good fund manager can find opportunities even when stock markets are high.
See Also: Difference Between Mutual Funds and SIP
3. Investments in equity mutual funds are for the long term
Stock markets are at all-time highs. You feel tempted to empty your bank account and invest all the money in an equity mutual fund.Relax...Take a deep breath before making any hasty decisions. You can't make money overnight from equity mutual funds.
Does a plant grow into a tree in a single night? Does it not require water, manure and sunlight? In much the same way, your equity mutual fund investments require careful monitoring, corrective action if necessary and of course, time to grow.
Invest in equity mutual funds with a time horizon of at least 3-5 years. "Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."
Equity mutual funds are a great way of investing in stock markets, when Nifty and Sensex are at all-time highs. Yes, stock markets are at all-time highs, but there are sectors which are beaten down and opportunities for good investments still exist. The investments of equity mutual funds are managed by fund managers. The fund manager will use the money you invest, to buy and sell stocks that he or she has carefully researched. You don't have the headache of searching for quality stocks. Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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