Have SIP investments and Rs 30 lakh for lumpsum? Here’s how to invest in mutual funds for long-term wealth creation

Synopsis

A 38-year-old investor with a 20-year horizon is considering a Rs 30 lakh lump sum investment alongside her existing SIPs. Financial expert Harshvardhan Roongta advises careful evaluation of market conditions and risk appetite before deploying the lump sum, suggesting either equity or hybrid fund strategies for wealth creation.

Building long-term wealth through mutual funds often involves a mix of disciplined SIPs and well-timed lumpsum investments. However, while SIPs help navigate market volatility through staggered investing, deploying a large lump sum requires careful evaluation of market conditions, risk appetite, and asset allocation. Investors with long horizons can benefit significantly, but the approach needs to be structured.

A similar query came from Sandhya, a 38-year-old investor and viewer of The Money Show. At 38, she is already investing through SIPs across categories—large cap, mid cap, flexi cap, and small cap funds—with a total monthly investment of Rs 10,000. With a long investment horizon of 20 years, she is now considering deploying a lumpsum of Rs 30 lakh and wants to understand the return expectations and potential wealth creation.

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Her current SIP investments are in - Nippon India Largecap - Rs 4,000, Motilal Oswal Midcap - Rs 2,000, HDFC Flexicap - Rs 2,000, and Quant Smallcap - Rs 2,000.

Well-diversified SIP portfolio

According to financial expert Harshvardhan Roongta, Sandhya’s current portfolio is well-structured. With exposure across large, mid, flexi-cap, and smallcap funds, she already has diversification across market segments. “The schemes and allocations look good for now, and she can continue with her existing SIPs,” he noted.

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A long-term horizon of 20 years also works strongly in her favour for lumpsum investments she wants to make, as equity as an asset class has historically delivered better outcomes over extended periods.

Lump-sum investing: Think before you deploy

The key decision lies in how she deploys the Rs 30 lakh lump sum. Roongta advises that investors should carefully assess current market conditions, the geopolitical situation that we are in, and their own risk tolerance before investing a large amount at once.

The expert said that this is the time the investor needs to decide whether she wants to put this entire 30 lakhs into the equity mutual fund itself or she wants to use a hybrid fund strategy.

He emphasised that this is not about timing the market perfectly but about understanding volatility. “I am not saying it is not a good time to invest. I am not saying it is a good time to invest. I am only saying go back onto the drawing board, consider a situation that we are in right now, given that, and if she understands how market volatility is affecting investments, plus she has the risk appetite, most certainly go ahead and invest as lumpsum,” he said.

If Sandhya has the risk appetite and understands potential market fluctuations, she can proceed with equity investments. Otherwise, a more balanced approach may be suitable.

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If she is choosing to invest in equity funds

If she chooses to invest fully in equity, Roongta suggests she can simply add to her existing schemes to maintain portfolio consistency. A possible allocation could be: Nippon India Largecap, she can put Rs 10 lakh. HDFC Flexicap 10 lakh. Motilal Oswal Midcap Fund Rs 5 lakh. There is a new scheme that the expert added, which is the SBI Contra Fund of Rs 5 lakh. So, Rs 30 lakh in case she is comfortable putting the entire amount as lumpsum into equities.

He also suggested that instead of deploying the entire amount at once, she could consider staggering the lumpsum over 3–4 months, which can help manage short-term volatility.

If she is choosing to invest in hybrid funds

For investors who are unsure about current market levels or prefer lower volatility, hybrid funds can be a suitable alternative. Roongta recommends dynamic asset allocation or balanced advantage funds, which automatically adjust equity and debt exposure based on market conditions.

Roongta said that I would suggest the dynamic asset allocation category, which is the ICICI Pru Balanced Advantage Fund and Kotak Balanced Advantage Fund.

In this case, Sandhya could split the Rs 30 lakh equally between two such funds, providing a more balanced risk-return profile.

What should investors do?

The choice between equity and hybrid funds ultimately depends on an investor’s comfort with risk and understanding of market cycles. While a 20-year horizon supports higher equity allocation, lumpsum investing requires additional caution compared to SIPs.

For investors like Sandhya, the combination of a well-diversified SIP portfolio and a thoughtfully deployed lumpsum can significantly enhance long-term wealth creation—provided decisions are aligned with risk appetite and market realities.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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