Where to invest Rs 10 lakh today, after Sensex crossed 70,000-mark?

While the right asset allocation is important, investors should also keep in the mind the importance of right insurance cover and adequate emergency funds.

The benchmark Sensex reached a significant milestone by crossing the 70,000 mark on December 11. However, it is important for investors to remember that investing is a journey with a focus on the long term. This implies that short-term market fluctuations should be considered within the broader context of long-term investment goals and strategies.

Indian equities have shown positive performance in the past year, and gold prices have also witnessed a rally. Additionally, fixed-income investments appear attractive as interest rates are currently at a peak.

Before making significant investments in shares, experts recommend assessing your risk profile and understanding the purpose of your savings.

“Resist chasing short-term gains and avoid investing based on emotions. Resist the urge to make impulsive decisions based on market noise. Stick to your investment plan and avoid making emotional trades,” said Nitin Rao, chief executive officer of InCred Wealth.

“Also, maintain a diversified portfolio and ensure proper debt allocation to mitigate potential losses. Don't abandon your long-term asset allocation strategy in pursuit of short-term gains.”

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At this stage, how does one invest Rs 10 lakh?

Before delving into investments, it's crucial to prioritise financial protection. The first goal of any individual should be to get a good term insurance policy and a comprehensive health plan in place.

Close to your goals?

If someone is close to retirement or about to reach their goals, the main aim should be wealth preservation. If one’s goal is set to be attained in the next six to 18 months, this would be the right time to get out of equity and park your money in debt.

“We don't know how the markets will fare… mid-caps and small-caps have rallied quite a lot, and valuations are also trading at a premium at this point of time. If someone has achieved their goal or their goal is coming near, this would be a good time to redeem from equity or park money in debt from equity,” said Rushabh Desai, founder of Rupee With Rushabh Investment Services.

Stagger your investments

Supported by strong economic fundamentals and positive market sentiment, the Sensex has gained more than 13 percent since the start of the year. The Nifty 50 has fared a little better at 15 percent this year. Even as equities remain among the best long-term asset classes, prices at all-time highs warrant caution.

“Somebody who has long-term goals and understands equity risk, my suggestion would be to go for a longer, staggered investing in equity-oriented strategy in this environment, when the markets are high. Also, at this point of time, large-cap-oriented strategies should be preferred as valuations in small and mid-caps have gone up,” said Tarun Birani, founder of TBNG Capital Advisers.

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Dynamic asset allocation or balanced advantage funds invest in a mix of stocks and bonds, depending on the relative attractiveness of the asset class.

Stick with blue-chips

If an investor is in systematic investment plans (SIPs) for the long term, then they should just stick with their asset allocation and invest in funds based on their time horizon and risk profile.

This would not be an opportune time to put lump sum money in mid-cap and small-cap stocks as they have rallied quite a lot and valuations are on the higher side. Data from the BSE showed that on a year-to-date basis, the S&P BSE SmallCap and S&P BSE Midcap indices have rallied about 40 percent each.

“On the other hand, large-caps have been underperforming and the valuations compared to mid and small-caps are reasonable at this point of time. So, I would bet on large-cap index funds such as Nifty 50 or Sensex, or I could also choose a flexi-cap fund, which is more inclined towards large-cap stocks for fresh lump sum equity investments,” said Desai.

A guide to investing Rs 10 lakh

Kalpesh N Ashar, founder of Full Circle Financial Planners and Advisors, suggests that if a young person aged about 30 is investing at the current juncture, 25-30 percent can go into debt mutual funds.

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“If interest rates are peaking, we could see a rate cut and that could benefit fixed-income funds. So, out of the debt allocation, keep 50:50 between liquid and a medium to short-term bond fund (AAA-rated),” he said.

Ashar suggests that with the markets at a high and general elections coming up, it would be ideal to allocate only 20 percent in equity in a lump sum manner, while the rest can be via systematic transfer plan (STP) over the six months.

“The equity allocation can be spread across, hybrid, pure large-cap and flexi-cap funds. Also, some allocation can also go into mid-cap and small-cap funds, again through the STP routes,” said Ashar.

While the right asset allocation is important, investors should also keep in the mind the importance of right insurance cover and adequate emergency funds.