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Planning to invest a lump sum amount of Rs 1 Lakh in mutual funds

I'm planning to invest a lump sum amount of Rs. 1 Lakh in Mutual Funds. I have shortlisted following funds in large and mid cap category, Large Cap Funds - SBI Blue Chip Fund(G), Axis Long Term Equity Fund(G); Mid Cap Funds - JPMorgan India Mid Cap Fund(G), Mirae Asset Emerging Bluechip Fund - Regular Plan(G). I would like to know your opinion on the funds that I have shortlisted. I observe a lot of apprehensions about investing in Mid Cap Funds now. How relevant it is if I'm planning to invest for a term of 3 years. Is lump sum investment the right way considering the volatile condition of the market now?

Oct 29, 2015 by Johnson Joy, Navi Mumbai  |   Mutual Fund

You have selected good funds. Please note Axis Long Term Equity Fund is an ELSS or tax saver funds. You can claim Section 80C deduction for your investment in Axis Long Term equity fund. As regards small and midcap funds, a lot of investment experts and fund managers share your apprehension. As per a recent research conducted by Economic Times, midcap companies are no longer available at a valuation discount compared to large cap companies. As such, many investment experts and fund managers are suggesting that investors allocate a greater portion of their equity investment to large caps. It is usually recommended that investors should have a longer investment horizon for midcap funds, typically 5 to 8 years or more. If your investment horizon is strictly three years, then you have want to allocate most of your investment to large cap funds. However, if you can afford to have a longer investment horizon for your midcap funds, then the midcap funds have the potential to deliver higher returns than large cap funds.

The Sensex and Nifty have corrected quite a bit from its all time high; as on October 28 2015, they are 10% lower than their all time highs and therefore, you can invest in lump sum since you have a three year investment horizon. While, many market experts believed that the market bottomed out in September, there are others who expect another round of bout of volatility in December, when the US Federal Reserve is expected to increase interest rates. Also, the results of the Bihar elections may have an effect on the market. It is not possible to predict short term market movements, especially if they are impact by such events. If you expect the market to be volatile over the next few months and want to take advantage of it, you can invest in lump sum in liquid funds (of the same AMC) and then transfer systematically (through STP) into the equity fund of your choice over the next 3 to 6 months.

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