Is it opportune to invest in equity mutual funds?

Equity mutual funds are very popular amongst retail investors. An equity fund is a mutual fund scheme that invests predominantly in equity stocks. There are equity funds of every type and characteristic available to match every risk profile and investment objective that investors may have.

Different categories of equity funds

1) Large-cap equity funds

2) Mid-cap equity funds

3) Small-cap equity funds

4) Multi-cap equity funds

5) Themeatic equity funds

Livemint spoke to market experts on the right timing to invest in equity mutual funds.

Vinit Khandare, CEO & Founder, MyFundBazaar said the valuation of the stock market is the obvious cause.

When the market is stagnant or fluctuating within a narrow range, many investors tend to lose hope, particularly those who are relatively new to the market. "This is an incorrect assumption because it only keeps in check the current situation and ignores historical trends or the most likely future risk appetite,” said Vinit Khandare.

Does this mean now is the right time to invest in Equity Mutual Funds with Sensex at an all-time high? 

Absolutely! The market future depends on economic growth, business outlook, and several macroeconomic factors like inflation, interest rates, capital expenditure, consumption, etc, said Anup Bansal, Co-founder, Scripbox.

Khandare advised investors to capitalise on bull phases. Investors should continue to hold positions in the market. Smart investors frequently invest their excess cash after a large market correction. This aids these investors in building wealth over an extended period of time, added Khandare

Investors should make an extra effort to invest if the market experiences a severe correction or valuations seem appealing.

According to Anup Bansal, Co-founder, Scripbox, while it is always desirable to invest at market lows and sell at market highs, no one can predict the market movement. 

Equity mutual funds with numerous fund categories have done well and demonstrated positive performance in recent years. 

“For instance, large-cap and mid-cap funds have yielded an average return of around 5.50%, respectively, over the past year, while their returns over the last five years have been around 12% and 10% (based on Nifty 100 and Nifty Mid-cap indices),” said Anup Bansal.

“However, some investors may become discouraged when the market is not showing significant changes or is moving within a tight range. Some may even stop investing, especially if they are new to investing. Investment managers warn that such assumptions only consider current market conditions, failing to take into account past trends or future scenarios,” said Amit Gupta, MD, SAG Infotech

When the market corrects significantly or valuations become attractive, investors should consider investing more if they have the means to do so, Gupta added.

Investing in equity, mutual funds, or other asset classes based on perfect timing consistently is impossible. Therefore, it is crucial to focus on long-term goals and make investment decisions accordingly, regardless of the timing.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.