ValuePickr Forum

One Time Large Fund Deployment - Any Best Practices

Q&A: Questions & Answers Personal Finance Q&A
#1

Hi All -

One of my relatives is taking a VRS from government service and is expected to receive a one time payment in the range of 25-30 lacs. I want to learn if there are any Personal Finance suggestions on how to deploy a one time corpus into Stocks.

We don’t want to buy property with the high cost of acquisition / maintenance and disposal. We are open to both Stocks and Mutual Funds. However we are conservative in nature and stocks even though corrected in last year are near historic highs. We could buy good companies like Ultratech / Asian Paints / Maruti etc, but they will still invariably fall with the market.

Since VRS cannot be put off, we don’t have the timing luxury. The last option to delay the stock / MF investment will be a bond fund that will need a 3 year investment period to avoid short term tax, but we are not sure when the market will fall and don’t want to get locked in for this period.

Any suggestions / strategies?

Thanks, Manish

Disclaimer - I didnt see any topic on this question so starting a fresh one.

#2

Will be helpful to understand the current state of investments, emergency/ health fund, liabilities and requirement of funds. Equity/ MFs will need time to prosper and give return that beat alternate investment tools but if you need the fund back in say 5-7 years, a diversified portfolio with greater stress on fixed return will be better.

#3

Hello Manish,

Price movement is the function of financial markets. Individual stocks come with inherent risks. If market corrections bother you, I would advice you to stay away from stocks. No point in losing your sleep in pursuit of extra few percentage of growth.

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#4

A relatively solid fund during both boom and bust times which I recommend my novice friends who don’t have high appetite or conviction in stocks is the Franklin Dynamic PE ratio FoF (please go for direct option!). Basically the fund puts more in equities when stocks are cheap and sells off when they become expensive. Now past performance is not an indicator of future results so be cognisant of that. Anyway it has given handsome inflation beating results over a long time with less downsides than an equity fund. Don’t expect the fund to Make you insanely rich (heck don’t expect any fund to make you insanely rich). I absolutely love the contrarian nature of the fund. Far better than trying to time the market yourself.

While the fund compounds your money you can learn about equity and patiently- very patiently - pick 20 trades over your entire lifetime (Warren Buffets 20 ticket punch card rule).

Disc: I’m not an advisor so do your own research. I have a small amount allocated to the fund to put my money where my mouth is.

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#5

I think the markets are overvalued at them moment
Wait it out another 6 months/1 year
The markets will go high during this time but don’t count and regret missed opportunities
Use this time to learn the companies and understand whee their growth will be in the next 10 years
Let the market come to you
or buy something now but don’t look at it for 5 years
Personally I have disinvested all holdings

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#6

Hi, Thanks for the replies. Few clarifications.

@aashish2137 - My mistake. I should have mentioned the current state. My relatives finances are stable with no immediate monetary requirements. Also Govt continues to provide adequate Health Cover and Pension for day to day expenses.

@NikhilJain - On the price movement part, generally we are ok to stomach losses for few years. However the current state of the market seems to be primed for losses and hence the query as to what are the options for past experiences of somebody who had to deploy funds when the Nifty was at 9000.

Also in general is there some suggestion on
1 - The breakup in Equities / Bonds given that the market is back at 8250?
2 - Which equities to be selected for say a 5-10 year term?

Thanks, Manish

#7

That’s where value investing comes in. And by value investing I do not mean growth investing necessarily. Although growth investing is great, at times, we tend to pay too much for a business. If you can find a good, growing business at a fair value, there is no bad time to buy. Be it nifty at 7k or 10k.

#8

One option is to park the entire sum in liquid funds and then invest in mutual funds or equities depending on requirement.

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