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When to Start Investing in Mutual Funds

By Edited Jan 8, 2016 0 1

Learn to invest in mutual funds

The common investors in a mutual fund

Many people are hesitant to start investing in mutual funds for the simple reason that that they don't fully understand how a mutual fund works. The time period spent on deciding when to start investing in mutual funds has an effect on investment returns of mutual fund shares. The longer you delay on deciding to start investing, the more time would be lost that should have been used for an investment to grow income returns for itself. Time is gold as they say.

So when is the right time to start buying mutual fund shares?

The best answer would be now!

Now is the right time to buy shares from a mutual fund then let the power of compounding interest do its job of creating your investment value. If we buy shares at a later date, their individual purchase price would be expensive by then.

There are two important things, among others, that we should keep in mind when buying mutual fund shares. First, let's take into consideration the time value of money. As time goes by, more often than not, money devaluates due to inflation. Every year, our money loses its purchasing power. A bill right now could buy two cans of soda, but only one the next year. Second, let us leverage on the power of compound interest. To quote the great Albert Einstein, "compounding interest is the greatest invention of man." By compounding interest, an interest income earns income also by itself. Your mutual fund investments grow exponentially with the power of compound interest.

These two considerations that I've mentioned, of course, will not work without the factor of time. If this factor will be taken out, 1 dollar will still be 1 dollar in value. If asked for the right time to invest in a mutual fund, the right answer would be as soon as now.

I know that the financial market has its mood swings, at times more erratic that you can assume that it will blow a country's economy away. But history tells us that respective economies around the world bounce back after hit by an economic crisis. With this reality, I am thinking that when a mutual fund's performance is going downhill, don't you just do panic selling of shares, at least try to observe the performance of other mutual funds. Some very learned investors think that the most opportune time of buying shares is during an economic low point - think of Warren Buffet's value investing philosophy.

Remember the cliché "don't work for money, instead let it work for you" through compound interest and the time value of money. Now is the right time to invest in mutual funds.

 

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Comments

Sep 11, 2010 12:46am
scheng1
If a person has enough money for diversification, it is better to invest direct in stock market
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