When is the right time to buy a mutual fund?
I understand that when it comes to stocks, it’s about buying it low (stock is undervalued). But what about mutual funds? Would it matter how high the current NAVPS is? Or is there a different gauge in evaluating whether it’s the right time to buy a mutual fund or not?
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Just after big market corrections. I’d say the right time is now. Just dollar cost average. Buy at regular intervals for a couple of years, then just sit back and wait for the right time to sell.
1988.
Of course it matters, the price of mutual funds fluctuates along with stocks. The NAVPS is the value of all shares held by the fund.
The worst time to buy a mutual fund is near the end of the year. Thats when they pay capital gains. You just get part of your money back then and its taxable. Otherwise it really doesnt matter if you do dollar cost averaging. The longer an investor stays in a fund the more tax efficient it is for them.
1. Nobody – NOBODY – knows what the stock market will do in the near term
2. Mutual funds are LONG-TERM (5-10 years or more) investments. If you’ll be needing the money in less than five years, look to more conservative investments, like CD’s.
3. Time is your best friend when it comes to investing – the sooner you get started in life, the better.
Conclusion: “Now” (whenever that may be) is ALWAYS the best time to invest, as long as you observe #2 above.
If you’re really nervous about the market tanking in the next few months, I would recommend dollar-cost averaging, where you break up your investment into 6-12 equal parts and invest the same amount in each of the next 6-12 months. That way, you can take advantage of market dips, and buy some of your shares “on sale.” Of course, if the market does not dip, you’ll be missing out on some growth.
Do not worry about the fund’s NAV – it should have zero bearing on your decision. Without getting too technical, there is no reason a $100/share fund should do any worse than a $10/share fund.
I hope that helps. Good luck!
when the markets crash