Is it right to invest a lump sum amount of Rs 5 lakh in one mutual fund at this point in time? Can you recommend a single fund because I will not be able to manage more funds?
Ravi Kiran, Hyderabad
Investments in equity mutual funds should be done systematically and regularly through SIPs irrespective of the market conditions to benefit from averaging costs on acquisition and the power of compounding over time. The only exception to this rule is when investing in tax planning funds or when making a tactical investment in a thematic or sector fund. Moreover, when investing in mutual funds you should have a financial goal which will determine the type of funds to invest in to achieve your goal in the time frame that you have in mind. Although it is convenient to manage investment in a single fund, it is not necessary that a good performing fund today may remain to be good forever. It is for this reason that we recommend investors to invest in a portfolio of funds to gain over market cycles to achieve their long-term financial goals.
