Should You Invest in Mutual Funds When the Sensex is Rising?

Are you looking for a professionally managed investment? Do you seek an investment that may offer a higher return as compared to fixed income instruments? You may consider diversifying your portfolio with equity funds. However, you may find the BSE Sensex rising in the past few months. It hit a low of 25,981 points on March 23, 2020. You could find the BSE Sensex rebounding smartly to reach over 46,000 points as of December 09, 2020. Should you invest in equity mutual funds when the Sensex is rising?

Why should you invest in mutual funds?

You may consider investing in mutual funds to get exposure to stocks and fixed income investments for your portfolio. You could select mutual fund schemes depending on your investment objectives and risk tolerance. You may choose fixed-income investments such as debt funds for your portfolio if you are a conservative investor. It could be equity-oriented funds if you are an aggressive investor. 

You may invest in mutual funds if you seek a professionally managed investment. The fund manager and the team of researchers pick the best stocks or bonds, depending on the investment objectives of the mutual fund. 

You could invest in mutual funds to diversify your portfolio and meet financial goals. It helps you pick a suitable investment depending on your investment horizon and risk appetite. You may consider investing in equity-linked saving schemes or ELSS. It is a tax saving mutual fund which may offer the twin benefits of wealth creation and tax saving over some time. 

Should you invest in mutual funds when the Sensex is rising?

You could consider investing in equity funds to achieve your investment objectives over the long-term. You may invest in equity mutual funds through the systematic investment plan or the SIP. It helps you invest a fixed amount regularly in a mutual fund scheme of your choice. You may avoid timing the market if you invest in equity funds through the SIP. 

Also Read: ESG Funds: Should You Invest in These Funds?

Invest in mutual funds through the SIP if you want to enjoy the benefit of rupee cost averaging. It helps you purchase more units when the stock markets are falling and lesser units when stock markets rise. You could average out the cost of your mutual fund investment over some time. 

You may invest in equity funds if you opt for the SIP route even if the Sensex is rising. It could help you achieve your financial goals over the long term, even if the stock markets remain volatile over short periods of time. Investing through the SIP helps you stagger your investment in the mutual fund scheme over some time. You may use the fall in the mutual fund scheme’s NAV to accumulate units at lower prices. However, investing through the SIP prevents you from making excessive investments in a rising stock market as you get lesser units at higher levels. 

Should you stop SIPs when the Sensex is rising?

You may feel tempted to stop SIPs when the Sensex is rising and resume when it falls. However, you are timing the market, and you can’t accurately predict the movement in the stock market. You could consider continuing your SIPs even when the Sensex is rising and avoid timing the market. 

You don’t know how high the Sensex may rise or how low it could fall. You may lose money if you can’t make the right decision or stay in control of your emotions. You must focus on your financial goals and continue your investments even when the Sensex is rising. 

The swift recovery of the Sensex over the past few months has surprised many investors. You could struggle to time the market and lose an excellent opportunity to earn a high return from your mutual fund investments. You may consider investing in the mutual fund through a systematic investment plan. It helps you average the cost of your investment even when the Sensex is rising. In a nutshell, you may focus on your financial goals and stay with your investment for the long-term. 

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