The stock markets are trading at their all-time highs, due to which several investors are hesitant to invest in the markets and are waiting for the market corrections to happen. If you think that the markets are overvalued, we prompt you to think again. The concept of overvaluation or undervaluation should not concern an investor if they are planning to stay invested in the markets for a prolonged duration. In this article, we will understand top five things that an investor must try to avoid while investing in mutual funds when the markets are high.

Things to do while investing in mutual funds when markets are high

Here are top five things that you as an investor must be careful about while investing in mutual funds when the markets are at their all-time high:

  1. Re-evaluate your financial portfolio
    When the markets are high, you might feel quite anxious and turn towards withdrawing your mutual fund investments. In such circumstances, it is advised to consult a mutual fund expert or a financial advisor who can help you re-evaluate your investment portfolio. If you are one such investor who has invested purely in equity mutual funds, you might consider shifting some of your investments to fixed-income instruments such as debt funds.
  2. Evaluate your goal
    If you have met your financial goals, you must re-evaluate them. You can also consider setting up new financial goals which can help you move your capital in a more efficient manner. If you were following aggressive style of investing, you can now switch to slightly conservative style of investing which can help you avoid fear traps and greed.
  3. Diversify diversify diversify
    Rather than withdrawing your mutual fund investments, you can choose to systematically allocate your assets to fixed-income securities, commodity funds, or international mutual funds. This will offer peace of mind to investors. What’s more, a well-balanced investment portfolio also safeguards an investor with the negative implications of value erosion.
  4. Do not pause or stop your SIP investments
    One of the biggest benefits of SIP investments is the concept of rupee cost averaging it offers to investors. Rupee cost averaging help investors to average out the total cost of their investments by accumulating higher mutual fund units when the markets are low and accumulating lower mutual fund units when the markets are high. Remember, wealth creation likely happens during a prolonged investment duration. Hence, it is advised to not stop your SIP instalments even when the markets are high.
  5. Do not attempt to time the markets
    Several retail investors make this investment mistake of timing the markets at least once in their mutual fund investment journey. However, one must understand that doing so can not only result in missed prospects but can also lead to inaccurate investment decisions that can drastically impact the returns earned on mutual fund investments. Rather than timing the markets which is almost next to impossible to achieve accurately at all times, one must consider investing time in the market – i.e., stay invested for a prolonged duration.

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