Does it make sense to invest in mutual funds now?


Is it advisable to invest in mutual funds when the market is down? I have been investing in SBI Long Term Equity Fund and HDFC Tax Saver Fund for a year and a half.
–Mohinder Singh

It is not possible to predict the future development of the market. At best, we can make guesses with the available facts and figures. However, we can always be wrong. This is why it is advisable to invest in stocks only if you have a long investment horizon and an ability to tolerate volatility. A long investment horizon will help you weather different market cycles and earn good returns.

You seem to be a new mutual fund investor. You invest in two tax-saving mutual funds or equity savings plans (ELSS). These schemes help you save taxes under Section 80C. They come with a mandatory lock-up period of three years. This means that you can only sell them after three years. Note that if you are investing through an SIP, each monthly investment must last for three years. However, it is not necessary to sell ELSS investments shortly after the end of the mandatory lock-up period. As long as the plan is doing well, you can continue with your investments.

Why you chose these two schemes is unclear. The SBI Long Term Equity Fund is an average program, and the HDFC Tax Saver Fund has only started to do well in the last year. The following financial year, you can invest in a better performance of the ELSS category.

Here are our recommended diets in the category – Best ELSS to invest in 2022

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