How to invest a lumpsum

By Morningstar Analysts |  23-04-19 | 
 

The Morningstar Investment Management (MIM) team provides broad guidelines to readers who have a query.

  • In a number of instances, we have suggested Banking & PSU Funds as these have a mandate to invest at least 80% of the corpus in banks and PSUs. Keeping in mind the current market scenario post the IL&FS fiasco, these are safer bets from a credit perspective.
  • When it comes to portfolio construction, an asset allocation-based approach should be followed as it is one of the key determinants of the portfolio’s performance, in terms of risk and return.
  • A suitable asset allocation is typically based investment horizon and risk appetite. Generally, longer the investment horizon and higher the risk appetite, higher would be the allocation to equity.

I have Rs 30,000 to invest. The money is from a security deposit which I will be required to return after 24 months. Can you suggest me some mutual funds?

- Ajay

Given the time horizon and the goal concerned, you can look at a 100% fixed income allocation with investment in short-term accrual funds maintaining a high credit quality portfolio.

We suggest:

  • Banking & PSU Funds
  • ST Income Funds
  • Corporate Bond Funds

I want to invest Rs 1 lakh for 12 months with no risk of capital. What are the options?

- Nitin

Given the time horizon and very conservative risk profile, you can look at a 100% fixed income allocation with investment in short term accrual funds maintaining a high credit quality portfolio.

We suggest:

  • Banking & PSU Funds
  • Liquid funds
  • Ultra Short-term funds

As an NRI, I want to invest 3 to 5 lakhs for 3 to 5 years. Which mutual funds do you suggest?

- Ramani

NRIs can invest in Indian mutual fund schemes subject to provisions applicable in the Foreign Exchange Management Act (FEMA). Most fund houses in India don’t allow NRIs from U.S. and Canada because of the various compliance requirements under Foreign Account Tax Compliance Act (FATCA).

Considering a horizon of 5 years and assuming a moderate risk profile, this is what we suggest:

  • Equity: 30% (25% to large caps, 5% to mid caps)
  • Fixed Income: 70% (Banking & PSU Funds, ST Income funds, Corporate Bond Funds)

As your goal approaches (last 2 years), the allocation should shift around 10% each year out of equity into fixed income.

I am 65 years old. Dependent wife (55 years). No loans. Rs 40 lakh in a fixed deposit and Rs 20 lakh in a PPF account. I would like to invest Rs 30 lakh in mutual funds. 

- KSM

If the Rs 30 lakhs to be invested requires liquidating your fixed deposit, be mindful of any penalty charges and tax implications, if applicable. As no time horizon has been indicated and no information on any source of income; considering your age you can look to allocate the Rs 30 lakh corpus entirely into short term accrual funds maintaining a high credit quality portfolio.

We suggest:

  • Banking & PSU Funds
  • ST Income Funds
  • Corporate Bond Funds

Post your query by accessing the Ask Morningstar tab.

The Morningstar Investment Management (MIM) team will endeavor to answer queries related to portfolio planning from our registered readers.

However, they recommend that readers consult a financial adviser for specifics.

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