Why is it the right time to invest in equity mutual funds?

Is it the right time to invest in equity mutual funds? Why mutual fund managers/experts believe that it is great time or opportunity to invest in equity mutual funds?

Many mutual fund managers believe that it is the right time to invest in equity mutual funds. Even mutual fund advisors and financial planners have been telling their clients that they should invest more in mutual funds if they have any surplus savings. Why do these experts believe that it is a great time or opportunity to invest in equity mutual funds?

The obvious reason is the valuation in the stock market. The stock market has been stuck in the last one year. The S&P BSE Sensex index was around 57,292 on March 21, 2022. The key index is around 57,401 in the early morning trade yesterday. Clearly, the market moved in a tight range in the year. However, that is not the whole story.

Valuation of the Nifty 50 reached 10-year averages for the first time in nine months as many global and local uncertainties led to a compression in price-earnings (PE) multiples. “As the benchmark index corrected nearly 5% since the beginning of the year, the Nifty’s PE dropped to 17. 3 times one-year forward earnings — in line with the 10-year average. This is the second time since the Covid-19 lows of March 2020 that the Nifty 50 index dropped to levels of long term averages,” it said.

Mutual fund managers share their investment journey and how they dealt with bad phases in the market.

ICICI Prudential Mutual Fund said the market has become attractive. “Our Equity Valuation Index highlights that equity market valuations appear reasonable post correction and has moved to the lower-end of the neutral zone. We recommend equity investing with a long-term perspective coupled with Hybrid/FOF Schemes that allocate across different asset classes and may help navigate market volatility,” it said.
All these developments have prompted many stock market pundits to believe that the valuations have become attractive in the market.Mutual fund managers say many investors tend to get discouraged when the market is going nowhere or move in a tight range. They say investors, especially relatively new ones, stop their investments at this point as they believe there is no point in continuing their investments. These fund managers say this is an erroneous assumption that only takes into account the prevailing conditions, without including the past trends or the likely scenario in future..

Most sideways markets often end up giving fabulous returns. However, investors should stay in the market to benefit from such bull phases. Smart investors often invest their surplus funds when the market has corrected significantly. This helps such investors to create wealth over a long period of time. However, this doesn’t apply to many individuals who have the habit of pausing their investment in range-bound markets.
Financial planners say investors should always remember their goals and asset allocation in a range-bound market. This will help them to stay on course. Planners say constant reminders help many individuals to stick to their investment plans. Whenever the market corrects significantly or valuations become attractive, investors should try to invest extra if they can.

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