I'm 45 and plan to invest Rs 25 lakh for 5 years. Where should I invest?

I’m 45 and plan to invest Rs 25 lakh for 5 years. Where should I invest?

My age is 45, and I am planning to invest for up to 5 years. I currently have Rs 25 lakh. Please tell me where to invest and another Rs 1 lakh I would like to invest monthly.

Reply by Mayank Bhatnagar, Co-founder & COO, FinEdge.

Since you are investing with a mid-term horizon of 5 years, it would be important to prioritise the balance between risk and return. This would entail understanding your goals, risk tolerance, and the need to diversify your portfolio, ensuring a holistic investment approach.

As an investor with a 5-year horizon and considering a monthly investment of Rs 1 lakh, it is important to create a balance between potential returns and risk. Here’s a suggested investment approach:

• Stagger investments: Make sure that you invest the lumpsum amount (25 lacs) through a Systematic Transfer Plan in a Large Cap Fund over the next 12 months. A systematic transfer plan or an STP is an investment strategy in which an investor periodically transfers a  predetermined amount from one fund to another. The primary purpose of a systematic transfer plan is to manage risk and optimize returns by reallocating assets over time. This is done by gradually moving funds at regular intervals from a liquid fund to an equity fund or vice versa.

• Have a risk mitigation plan: Since you also plan to invest Rs 1 lakh monthly, consider a systematic investment plan (SIP) into a mix of mutual funds. The key would be not to chase very aggressive returns and invest in a mix of large Cap oriented funds (40%), balanced funds (40%) and flexi cap funds (20%)

• Remain Invested over 60 Months:Do not let market information clutter your decision-making. make sure you continue your SIP’s and remain invested. Real wealth is created by compounding and requires the investor to manage their behaviour throughout their investment horizon.

• Need for an expert and a personalised plan:Everyone’s goals and personal life stage are unique and hence it is important to have a customised investment plan prepared by an investment expert who can create a roadmap on your specific needs and objectives.

It is recommended that the actual allocation should be based on a detailed investing process. All investment decisions should be made after considering your financial goals, risk tolerance and investing beliefs. Success in investing is a result of all these.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at [email protected]. We will get your queries answered by our panel of experts.)

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