How to invest ₹1 lakh in the present market

This has been fuelled by investors who have accumulated savings in the past year due to lower spending. More investors are emerging each day.

However, being new to the market can be daunting, given the myriad investing options. Mint asked four financial advisers what an investor should do now if he or she has ₹1 lakh to invest. As a baseline, we have kept the investor in the age group of 25-30 years, with a moderately high risk appetite and a long-term investment horizon.

Harshad Chetanwala, a Sebi-registered investment adviser and co-founder of MyWealthGrowth

For people who have an investment horizon of more than 10 years , have a moderately high risk appetite and are young, equity is the best option. However, based on today’s market conditions, ₹1 lakh need not be invested altogether. One can look at about 40-50% as lump sum and the rest can be invested in a span of coming three months or simply do a systematic investment plan (SIP) for six months.

Within equity, if a person is investing for the first time, he or she can create a mix of funds with 20% of your total corpus into an index fund, 45% in two-three flexi-cap funds, 15% in a mid-cap fund and maybe add a large-cap as well. I would not suggest non-equity allocation because the holding period is 10 years.

One key thing to keep in mind is that investors shouldn’t look at the performance of the markets over the past one-and-a-half years. Therefore, it is very important to tone down your expectations from the market when you are investing right now.

Kirtan Shah, chief financial planner at Sykes and Ray Equities (I) Ltd

For young investors who are new to the market, it doesn’t make sense to invest outside of equities. Of course, markers are pretty richly valued and they are not going to give significant returns over the next 24 months. Therefore, I would not recommend making lump sum investments at this point.

The idea should be to use debt and do a systematic transfer plan (STP) over the next 12 months and allocate the money. Since the risk appetite is moderately high, the funds can be divided between flexi-cap and mid-cap funds. Ideally, a lot of flexi-cap funds also take care of global exposure.

You can have a small part in gold and debt as part of your overall asset allocation strategy, but at this point both debt and gold don’t look promising.

Mrin Agarwal, founder, Finsafe India Pvt. Ltd

If an investor is new to the market and has a moderately high risk, then the best strategy would be to go for a combination of an index fund such as the Nifty50, a flexi-cap fund that can give international exposure and a mid-cap fund. A new investor can take a higher amount of equity exposure and need to have a long-term time-frame, which is seven to 10 years. It is also good to have diversification among different categories. If investors can hold the investment for the long term, then a prudent approach would be to go 100% into equity; but instead of going lump sum, they should go for the SIP route.

Suresh Sadagopan, founder, Ladder7 Financial Advisories and a Sebi-registered investment adviser

If an investor is putting money from a long-term point of view, then only a flexi-cap fund would be the best bet because essentially you are giving the mandate to fund managers to do wherever they want and invest in the best companies across the best sectors and whatever realignment they want as per the conditions of the market over a period. So, for an amount of ₹1 lakh, one good flexi-cap fund is what I would recommend.

For investing style, if the money is available upfront and the investor is worried about the volatility in the market, he or she can put the money into an overnight fund and initiate a systematic transfer plan (STP) into an appropriate equity fund over the next 5-10 weeks to capture the volatility.

In case the money is going to come as a saving in their monthly income, then an SIP is the best way forward.