Planning to invest in equity MFs currently? Read this!

Recently, the markets fell close to 30 per cent. This made investment in equity more lucrative. Therefore, many people are trying to divert their surplus money lying in the savings bank account or other investments towards equity. However, there are various things that one needs to consider before investing in equity mutual funds.

Look at the current situation

It is completely understandable to make those superlative returns you wish to invest in equity MFs for which, you even get ready to divert your investments from fixed deposits and recurring deposits to equity mutual funds. However, before doing so, you first need to ask yourself as to when exactly do you need this money. If you require this money in say, two to three years then, it is better to keep that money in bank fixed deposits or short-duration funds but if you require it in the next five to seven years then, consider investing in equity MFs.

Emergency fund

This is one of the basic things that you first need to take care of. Therefore, it is always recommended that you must have at least three to twelve months of expenses as your emergency fund depending upon your personal financial situation. If this is not in place then, there is no meaning in investing in equity MF. The reason being in case of any emergency, such as temporary loss of income, you would need to redeem your equity investments without getting complete benefit out of it.

Medium-term investment horizon

If you are considering investing in equity MFs now with an intension to make short-term profits then, it is recommended to stay away from equity. This is because equity is currently very volatile in nature and would remain the same, unless we see things improving around the world, which would take some time as of now. Hence, if you wish to invest in equity MFs then, have at least a medium-term investment horizon.