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What Is The Best Time To Invest In Debt Funds? Know Here!​​

When did you start schooling at the age of four when kids in your neighbourhood were in the school before they turned three? Similarly, when did you drop out for a year after college for various exam preparations while many of your friends picked a job right after they graduated?

All these questions may sound unrelated to investments. However, there is a hidden connection - the best time to do anything is not the same for all. The same holds when you want to invest in debt funds. After thorough analysis, you picked debt funds that invest in fixed-income securities. Now that you have started to think you should invest in debt funds, another doubt came your way - and that is the best time to invest in debt funds.

Still wondering if there is any best time for such mutual fund investments? Continue reading.

Is There Any Best Time to Invest in Debt Funds?

For this, you need to understand the working of debt funds to make an informed investment decision -

Debt mutual funds invest in different types of debt securities. Hence, ideally, the best time to invest in debt funds would be when the interest rates are falling or are expected to fall in the recent future. As the interest rates go down, the price of bonds increases, which can make the debt fund’s Net Asset Value (NAV ) rise. As a result, it can benefit debt fund investors in terms of good returns.

Does this mean you need to wait for the interest rates to fall to start investing in debt funds?

As a matter of fact, it is impossible to predict the movement of interest rates in any economy with certainty. Those who try to time the market can risk losing money more than creating wealth. It is because several domestic and international factors impact the interest rate movement. This is why you need a prudent strategy to invest in the right debt funds.

How Should You Proceed with Investing in Debt Funds?

1.  Invest based on your goals

Do you want to utilize returns from your mutual fund investments the very next day or have the patience to wait for a particular period till you withdraw the invested amount?

First and foremost, you need to know your goals. Investing money in mutual fund schemes without any goal is like walking on the road with no destination. You will never know where you reach unless you have a clear idea of where you want to go.

Hence, it is quite important to enlist a few goals and then invest in appropriate debt funds accordingly. Also, when you are goal-focused, your mind may not feel distracted towards the best or worst time to invest.

2.  Keep an eye on your income-to-expense ratio

Started your career with a salary of Rs. 20,000 per month and wondering if you can invest more than Rs. 10,000 to create wealth?

While there is nothing wrong with the intention here, it is quite unrealistic. Mutual fund investments bear the right fruit when you allow them to grow over a certain period. If you have no other financial obligations right now, this does not mean you won’t have any a few years later. If they come, they can impact the investment schedule if planned in the above manner.

Hence, it makes sense to plan well about the proportion of your regular income you can invest in debt funds.

3.  Get into the details of how debt fund work

Along with keeping an eye on your goals and income, it is equally important to understand how the investment avenues you select work and what determines the resulting returns you can expect. The same holds for debt funds.

For example, you may choose to invest in debt funds when the interest rates fall. But how do you come to this conclusion? How will you ever gauge the impact of this external phenomenon on your investments? It requires you to gain knowledge that the interest rate movements are inversely proportional to the bond prices.

So, get into the details, do the hard work of researching different types of mutual funds and how they work first. This way, you need not worry about timing the market and can continue to proceed toward achieving various financial goals.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.

Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.

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