I want to invest for the next three years and have Rs 2 lakh that I can commit for this timeframe. Should I invest the lump sum in a mutual fund or start an STP for the next 20 months for the same?
Vinod Kalra, Delhi
Going by the details that you have shared, it would be ideal if you invest systematically in a diversified equity mutual fund. However, as you have a three year time frame to invest, you could also consider investing in an equity linked savings scheme (ELSS). Investments in these funds up to Rs 1.5 lakh in a financial year qualify for tax deduction under Section 80C of the Income Tax and the investments have a three year lock-in. Given these features, it will be to your advantage to invest in these funds. You could consider investing in Axis Long Term Equity, Franklin India Taxshield, DSPBR Tax Saver or Birla Sun Life Tax Plan, which are all funds with a proven track record and long history. Instead of putting the entire Rs 2 lakh in one go, you could stagger the same over a 4-5 month period to reduce the risk of a onetime lump sum investment.
