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How to Invest a Rs 10 Lakh Corpus Across Equity and Fixed Income Assets in 2017


How to invest a Rs 10 lakh corpus across equity and fixed income assets in 2017
Economic Times

NEW DELHI: When they have cash to invest and save, many investors often find themselves in a dilemma, failing to decide which asset class to pick and how much allocation is to be made. 

Even seasoned investors often stumble, while trying to draw the best strategy to create wealth consistently. The best way is to allocate some part of the fund to mutual funds, and keep the rest in stocks, gold as well as cash. 

The first rule for investing in stocks is not try and time the market – not now, not ever. “Don’t rush to sell stocks on rallies. Instead, hold them for longer horizon, which could generate immense wealth,” market veterans say. 

Investors who can’t track the market on a daily basis should use the mutual funds (MFs) route to enter the equity market via systematic investment plans (SIP). To hedge risks, investors should resort to diversification which should happen across asset classes, and not just funds. 

Calendar year 2016 failed to cheer investors, but calendar 2017 holds promise, especially if you love equities. If you have sufficient funds to enter the market, this is the best time as the domestic market has already corrected over 10 per cent from its record high. 

For simplicity, we have taken Rs 10 lakh as investible corpus. 

“Investors with a long-term horizon should invest 30 per cent in equities, 30 per cent in mutual funds, 15 per cent in fixed deposits, another 20 per cent in cash and the rest 5 per cent in gold,” Kamlesh Rao, CEO, Kotak Securities, told ETMarkets.com. 

“In the coming year, investors will have to focus on economic recovery post demonetisation, as the real economy expands, as well as the pace of interest rate hikes in the US,” he said. Rao said the equity market is likely to outperform other asset classes in 2017. 

“On the back of an improving growth rate and rerating of valuation, we expect market returns to be better in 2017 compared with that in 2016. We remain optimistic that the Nifty50 can touch the 9,200-9,400 levels by year end,” he said. 

The outlook for the equity market remains constructive over the next 12-18 months amid attractive valuations after the recent correction. The Nifty50 is currently trading at a forward PE of 16.4 times, which is lower than its 10-year average of 18.3 times. 

Corporate earnings growth is also expected to revive strongly after the second half calendar year 2017. Investors should use volatility to systematically buy quality stocks with an investment horizon of 2-3 years. 

“Historically, if you take India, our main concern over the last 10-15 years has been that investor portfolios have had too much real estate, too little equities and too little fixed income instruments,” Saurabh Mukherjea of Ambit Capital said in an interview with ETNow. 

"Over the last year-and-a-half, it has become reasonably evident that real estate is not really going to be a great idea in terms of long-term returns on a portfolio. Investors have started swinging completely in other direction, loading up on equities," he said. 

The other in-between asset class, according to Mukherjea, fixed income, which has not been adequately explored or sold in India. “My reckoning is that this is actually a nice place for investors to be in.”

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