Is the market too high? How to invest in high market for short term and long term?

You have not mentioned which funds are for long term investment and which ones are for short term investments. From your fund selection we are guessing that, the first 4 funds are for long term investment and the last 3 funds are for short term. However, if this is not the case, then you should re-think your fund selection. Assuming our guess is correct, let us now answer your questions one by one:-

1. Your fund selection is quite good.

2. You can select two out of the three diversified equity funds shortlisted by you. On the other hand, if you think that you will be able to track the performance of all the funds in your portfolio on a regular basis, then it is fine.

3. Let us address Q3 separately for your short term and long term investments. For short term investments, you have rightly selected debt oriented funds. Though the funds selected by you are hybrid funds, the equity component is quite small and therefore the effect of volatility on returns will be fairly limited. You should make these investments in lump sum so that you can start accruing the yields as soon as possible and this will give you better returns over your investment period.

As far as your long term investments are concerned, you have not mentioned your investment horizon. If you have a very long horizon, say 7 years or 10 or even longer, then you can invest in lump sum. However, if your time horizon is less than 5 years, then the STP route may work well for you. Over the past few weeks, Nifty is trading in relatively tight range of 9,000 to 9,200. Unless corporate earnings support, it may difficult for Nifty to go much higher than current market levels in the very short term. There are concerns regarding inflation, monsoon and the global economy as well. All these factors may cause the market to be volatile over the coming months. STP works very well in volatile conditions. To STPs, you will have to select liquid funds from where you will transfer on a regular basis to the equity funds and balanced fund that you have selected. You have to make sure that, the transferor liquid fund and transferee equity or balanced fund are of the same AMC. For example, if you want to do an STP to Birla Sun Life Advantage Fund, you should first put the amount you want to invest in Birla Sun Life Cash Plus Fund and then transfer through STP once or twice a month (you can select dates), to transfer a fixed amount to Birla Sun Life Advantage. Since the outlook is uncertain, you can plan a STP for 6 months and select the monthly (or fortnightly) amounts accordingly. However, when you are doing an STP, you should track the market regularly. If you see a clear directional up move in the market, then you should stop your STP by making an application the AMC and transfer all your liquid fund balances to the equity and balanced funds.

4. The definitions of high market and down market are very subjective. Whether the market is high (expensive) or low (cheap), depends on the valuations (P/E ratios) in market. Here are suggested guidelines to determine whether market is expensive or cheap.

If P/E ratio is above 25, then it is supposed to be very expensive. Selling is recommended

If P/E ratio is between 20 to 25, then the market is supposed to moderately expensive. Caution is warranted at such price levels. But markets can rise if corporate earnings support.

Below P/E ratio of 20, market is fairly priced and as the P/E goes towards 15 it becomes cheap.

You can find the P/E ratio of Nifty (the leading market index) by going to NSE website (https://www.nseindia.com/products/content/equities/indices/historical_pepb.htm).

The P/E ratio of the Nifty is now around 23. Therefore, you should be cautious and STP is a good strategy in such market. However, we cannot definitively say that, the market is expensive because we are in the middle of the corporate earnings season. The earnings season so far has been mixed. Let us wait for more results to come in over the next few weeks or so. Then one can form a more definitive opinion on valuations. Hope this gives you some idea.