Should we invest in lump sum or staggered way

I want a answer from an advisor and their thoughts. I have a scenario here for one of my friend's family and they asked me this question on behalf of their son who is 33 years old. They have 25 Lac Rs surplus, and every month my friend has a capacity to invest 20 thousand Rs through SIP. Now I have selected around 6 mutual funds, few of them equity(more) and few debt. In equity one is Large cap and 2 mid cap. Here I might be wrong but based on my research I selected funds. Through SIP my friend will invest 3000-4000 Rs each month in each SIP making total of 20 thousand Rs. However about the surplus, he wants to invest in those same funds 25 lacs distributed, i.e., suppose 3-4 lacs in each fund selected. The horizon is minimum of 15 years, beyond that depends on that situation after 15 years. Questions is should he invest 25 lacs Rs in funds as an initial investment amount along with SIP, or if suppose we select eg., HDFC fund and allotment from him is 4 lacs Rs from 25 lacs plus 4000 Rs SIP every month for 15 years, in this case should 4 lacs go in HDFC in one shot at first instalment along with SIP or 50k-1lac every 2 or 4 months. This is where we are confused, the main confusion is are we allowed to invest more amount in ongoing SIP like above HDFC fund in 2-4 months period or whatever we choose. I will appreciate any good view on our scenario in order to grow money and minimizing risk?

Apr 12, 2017 by Piyush, Mumbai | Mutual Fund

We have following to comment and suggest on your query.

Mutual Fund investments should be made based on the investors risk appetite and the investment horizon. We are sure you must have taken care of that while suggesting fund names to your friend’s family.

With regards to investing the lump sum and SIP in the same fund, yes you can do that. There is no restriction from the AMC side. As long as the fund selection is good why not invest in the same fund irrespective of the method of investing – SIP and / or lump sum. You should restrict total number of funds selected to 5-6 only so that it is not cluttered or become unmanageable. The idea is to select very few funds which are really top performing.

With regards to your confusion, how to invest the lump sum, through staggered way or in one go? Our suggestion is that you put the lump sum in respective liquid funds of the AMCs in whose equity funds you have chosen to invest and then transfer a fixed amount every week from liquid fund to the equity fund through STP (Systematic Transfer Plan). This automatic process (STP) will help you ease the operational part of investing in the equity fund occasionally, benefit from rupee cost averaging due to market volatility and also earn around 6.50-7% from liquid funds. You can check this tool in this regard https://www.advisorkhoj.com/mutual-funds-research/mutual-fund-stp-investment-calculator

Please also note that there is no restriction in terms of number of times that you can invest in a fund or the amount.

Hope the above answers your query in full. Thanks for writing to us.

View All Queries

You haven't found the answer for your queries? Do post your queries to us.
POST A QUERY