At a time when benchmark indices are at an all-time high, most MFDs favour staggered approach rather than lump sum investment in equity funds, shows a poll conducted by Cafemutual.
The poll asked MFDs what clients with fresh money should do in the current market scenario. Most of them (74%) said they should opt for a staggered approach to invest in equity funds. 10% of the respondents were in favour of lump sum investment in equity funds and the rest 16% said the money should be invested in debt funds.
Here's a breakdown of the votes received in the poll:
Put lumpsum money in equity funds: 116 votes (10%)
Follow staggered approach to invest in equity funds: 822 votes (74%)
Put fresh money in debt funds: 180 votes (16%)
MFDs say current market condition is not suitable for lump sum investments. "Lump sum investment does not make sense at present. Investors should take a staggered approach. The investment can be topped up with lump sums as and when corrections happen," said Mumbai MFD Rushabh Desai.
Mumbai MFD Sadashiv Phene said clients looking to invest a large amount in one go should opt for hybrid funds instead of equity-oriented schemes. "One can put lump sum in balanced advantage funds as their managers have full freedom to respond to market conditions. They have the room to limit the downside in case of correction. If the investor wants to go for a pure equity fund then a staggered approach should be adopted," he said.
Equity markets have been on a rise since hitting multi-year lows in March 2020. As a result, the valuations across market segments have soared to new levels. In such a scenario, industry insiders have been advising investors against big lump sum investments, especially in mid and small cap funds.
"We are cautioning investors against aggressive lumpsum investments in small and mid-cap focused funds. If anybody is investing in mid and small cap funds now, he/she should ideally be looking at a longer term perspective because what has happened in the previous one year is unlikely to get repeated in the next one year," Harsha Upadhyaya, CIO-Equity, Kotak Mahindra MF told Cafemutual in August.
