A mutual fund is a professionally managed company that collects money from many investors and invests it in securities such as stocks, bonds and short-term debt, equity or bond funds and money market funds.
Mutual funds are a good investment for investors looking to diversify their portfolio. Instead of betting everything on one company or sector, a mutual fund invests in different stocks to try to minimize portfolio risk.
The term is typically used in the US, Canada and India, while similar structures around the world include the SICAV in Europe and the open-ended investment firm in the UK.
Why continue investing through SIPs in a volatile market?
When markets become volatile, many investors begin to doubt their investment decisions and think about stopping their SIPs or withdrawing their investments. It’s natural to worry when you see your investments in the red during a volatile market. But it would be wise to stay with your SIPs especially during a falling market because with the same amount of monthly investments you will end up buying more units. We all love to shop cheaply either during an online sale or just at the sabzi store. That’s not true? So why not for our mutual fund investments when prices are falling?
The market is more unpredictable even than our weather forecast apps. You can never perfectly time yourself to invest a lump sum when the market goes down. What happens if the market falls further after investing? Similarly, you can’t perfectly time yourself to sell at a high market because the market may rise further after selling. If you try to capture the market, you will be severely disappointed and your returns can be affected due to wrong timing. So it is best to invest regularly through the ups and downs of the market by investing through a SIP with a clear focus on your goals. You don’t have to worry about market volatility as the cost of your investments will average over a period.