Have recently got a large amount which need to be invested in mutual funds. Given the market valuations currently, what is the ideal duration of the STPs one should be doing? This amount is almost 60% of my networth.
I am an aggressive investor with a long term horizon of 10 - 12 years. Idea will be to have a 80% core and 20% satellite portfolio where 80% of the portfolio will have run of the mill index funds and the balance could be active / focussed / factor based funds.
Given the current valuations, large cap would be atleast 60-65% of the current portfolio with balance divided equally in mid and small cap. Endeavour will be to have a 50:25:25 portfolio in the long term which can be achieved by doing SIPs only in mid and small caps or rebalancing the portfolio after 3-4 years.
All opinions are welcome and appreciated.
Thanks.
A horizon of 10-12 years can balance the risk of investing in the current period of high valuations. There a few questions that need to be answered, though. What kind of market cap you want to invest in, do you have idea about the current sectors that are in vogue, do you want to buy value or growth, generally speaking, and how do you see the future growth of the market w.r.t to the inflows through mutual funds and economic situation etc. My point is that, what kind of a fall are you expecting after you buy, and how would you react to that fall and are you prepared to take the necessary action, if a big fall happens.
Markets can still go up for another year or two, or can fall for any reason before this calendar year. Mutual funds while not as risky as direct stocks, cannot escape the time correction, and it could be disappointing and frustrating to see the same NAV for many months or quarters. And if the allocated amount is large, as is your case, you may have to bear the opportunity cost.
Having time helps, but volatility can consume time and give a return we did not expect.
2 Likes
thank you for your comments. May be I should have elaborated more on my proposed mutual fund portfolio.
Idea will be to have a 80% core and 20% satellite portfolio where 80% of the portfolio will have run of the mill index funds and the balance could be active / focussed / factor based funds.
Given the current valuations, large cap would be atleast 60-65% of the current portfolio with balance divided equally in mid and small cap. The endeavour will be to have a 50:25:25 portfolio in the long term which can be achieved by doing SIPs only in mid and small caps or rebalancing the portfolio after 3-4 years.
