VR Logo

How should I start my investment journey?

Dhirendra Kumar lays down a road map for a first-time investor and warns against investing in a lump sum

I am now 25 years and have just started working. I want to start investing through SIPs. Also, I have some lump sum with me. Is it the right time to make a one-time investment in small- and mid-cap funds?
- Sagar

No, it is never a good time to invest lump sums in any kind of equity fund, especially for a beginner investor like you. The first thing to consider is whether you are liable to pay taxes and avail the benefits under Section 80C. If you want to avail the 80C benefit through mutual funds, it means you have to make an investment of up to Rs 1.5 lakh in a specified fund that gets deducted from your income to compute taxes, thus helping save taxes.

Always remember that the tax saved is the money earned and that's the only legitimate mechanism for individual investors to save taxes. So, in order to avail the benefit, choose a fund that helps you save taxes, along with equity exposure. Given this, an ELSS should be your first fund. It comes with a three-year lock-in. This lock-in helps new investors stick to their equity investments. Otherwise, they get anxious and end up running out of the market. It is very important to invest in equity with a long-term outlook.

So, an ELSS acts a good starting point. However, if saving taxes is not your main agenda, then choose a good aggressive hybrid fund and stick to it. Never invest in a lump sum and try to spread it over a time period depending on your comfort.