When to invest in mutual funds: An exercise in data science

I started with an interesting hypothesis: “Some days are better than others for investing in Indian mutual funds for buy-and-hold approach“. There’s nothing particular about mutual funds or India; it should apply to most investment vehicles and other countries but I have been investing in Indian mutual funds and wanted to know if I could do better by investing more on some days than others. There’s a story behind this hypothesis. A friend of mine said his financial advisor told him that their data showed, on average it’s better to invest:

  • during the second half of the month
  • on odd days
  • on Tuesdays, Wednesdays, Thursdays as compared to Mondays and Fridays

I guess we can come up with many stories for why these hypothesis may be true. People in India generally get paid on the last day of each month and have more money during the first half of the month than the second (It’s a different story in USA where most people get paid twice a month but have to pay rent etc. at the start of the month. They should have more disposable income during the second half.), so NAVs for mutual funds may be lower during the second half because on average, more people will buy during the first half and more people will sell during the second half. Since market is closed on Saturdays and Sundays, people might take more extreme positions during Mondays and Fridays and if you are investing for long term, it might be better to stay away from extreme positions. I couldn’t come up with any story for odd days but in any case, that’s all these are, stories.

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