I have an amount of Rs 10 lakh which I propose to invest in Equity Mutual Funds. My investment time frame is five to eight Years. Should I invest it as a lump sum or should I opt for the SIP route, spread over 5 years, i.e. invest Rs two lakhs per year? Some investment advisers tell me that as the present Sensex P/E is relatively low, I can opt for Lump Sum investment.
- Srinivas
Timing equity markets based on low Sensex Price/ Earnings is not a great idea. One can never predict when is the right time to invest in stock markets due to its unpredictable nature. Therefore, it is always beneficial to invest in systematic manner rather than going for lump sum.
What you can do is invest your money into three to four short-term funds and start a monthly systematic transfer plan in three to four equity funds of Large & mid cap category. You don't need to spread it over five years; you can do it by spreading your investments over 12 to 18 months.
This article was originally published on February 08, 2013.
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