I have saved ₹12 lakh from my salary. The funds are in a savings bank account. Due to extreme volatility in markets, I have not invested this sum. Markets are at all-time highs. These funds are needed only in 2028 and 2030. Can I request your guidance on how and where to deploy this lump-sum amount? I am not concerned about volatility, since its normal in equity/MF investment. My concern is entry time and fear of buying at high prices, which may impact the returns.

Balaji, Bengaluru

Though holding funds in a savings bank account preserves your capital, it does very little in terms of making your money grow. Today, a savings account with SBI, for instance, fetches 2.7 per cent interest for any amount above ₹1 lakh. Yes, private banks such as Kotak Mahindra Bank offer a higher 4 per cent on savings accounts with a balance of over ₹1 lakh. But even this is not surely tempting enough to leave funds idling in bank accounts as the returns may not match inflation.

Hence, if you have the appetite for risk, stock market-investing has the ability to deliver inflation-beating returns.

Markets are perceived to be at a high today. But the ₹12-lakh balance in your savings account has been accumulated from your salary over a long time period, encompassing times in which the markets might not have been on a purple patch. Accumulating money in a savings account and then trying to time lump-sum investments when we cannot accurately predict the exact market crests and troughs, is easier said than done.

Instead, regular investing through systematic investment plans (SIPs) during all market seasons will help solve the dilemma associated with timing the investment.

For the ₹12 lakh, you have an investment horizon of 7-10 years. This time-frame is reasonably comfortable for equity mutual fund investments.

You can divide this amount into smaller sums and deploy it over the next year or so in MFs whenever you find an opportunity from corrections.

You can consider Nifty index funds, large-cap, large- and mid-cap funds and multi-cap funds for this purpose.

While you have not mentioned the goal for this money 7-10 years down the line, room for extending the investment by a few more months or by a year or two may give you an advantage in case the markets are going through a downturn closer to your goal. Else, you can set a profit with which you will be happy, and move the sums to safer bank deposits, closer to your goal.

I have been a BusinessLine reader for the past two years and have benefited a lot by reading your columns. I have SIPs in ICICI Prudential Nifty Next 50 Index Fund (direct plan with growth option) and Kotak Emerging Equity (direct plan with growth option), and would like to add one more index fund. I plan to stay invested for at least 7-10 years for my long-term goals. Can you please suggest an index fund to go along with these two? Also, why is ICICI Prudential Nifty Next 50 Index Fund not rated in BusinessLine Portfolio Star Track MF Ratings ?

Dundi Ajay

Since you already have exposure to Nifty Next 50 stocks as well as a mid-cap fund, you can consider taking large-cap exposure through SIPs in HDFC Index Fund - Sensex Plan for your portfolio. Your investment horizon of 7-10 years offers a margin of safety for the market to go through a downturn, if any, and deliver the goods.

We do not rate index funds and exchange-traded funds (ETFs) in BusinessLine Portfolio Star Track MF Ratings as these are passively managed funds that mimic the underlying index but for a tracking error. Under active funds, the performance of the fund depends on the fund manager’s stock-picking skills. Hence, schemes in the same category can give very different returns due to the risk-return trade-offs taken by the fund managers.

Send your queries to mf@thehindu.co.in

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