Stagger funds over a yr for long term investment

Roongta said, "10 years is long enough to take a fairly large exposure on equity. I would suggest to put your funds in a liquid fund and through a systematic transfer plan. Don't do this one shot lumpsum investment in an equity fund. Maybe over 24 months or maybe over 12 months transfer this either into a balanced fund or into a large cap fund."

Here is the edited transcript of the interview on CNBC-TV18.

Q: I can invest Rs 4,000 per month for 20 years for my children's education. I am the only earning member at this point in time. I have three dependants. What would you recommend me?

A: Just to put that in perspective the figures that you gave is roughly about Rs 40 lakh in 20 years, which works out to just Rs 9 lakh today. As long as that is what your aim that if you had Rs 9 lakh and both your children were old enough to get that higher education then the goal that you have set for yourself is okay. Since you are fairly invested in debt, I think investment in equity is clearly something, which is advisable. You can put as much as 90% of that money through a Systematic Investment Plan (SIP) into an equity fund. You could continuously seek advice to see which funds you want to invest in.

You can invest it in Franklin India Bluechip Fund or a DSP Blackrock Top 100. If you can't keep reviewing your investments then maybe a Nifty index fund like Franklin India Index Nifty Fund is also good enough, though the returns so far on an index fund as compared to large cap funds haven’t been as good. But that prevents you from having to keep track of what is happening on your equity funds.

With the number of dependents, you need to take adequate life insurance and health insurance. Roughly, 10 times your annual income should be your term insurance at least. If you buy that online, I am sure within the premium that you are already paying, you will get substantially higher term cover. Please look at health cover as well; you should consider Rs 3 lakh for each of you plus a top-up cover. Insurance is extremely important to protect your investments simply because if something happens then all your investment plans will go for a toss.

Q: I want to invest Rs 1 lakh in lump sum with a time horizon of 10 years. How should I allocate the money?

A: If you are going to invest only for a year, obviously fixed deposits or a fixed maturity plans would have been advisable. But you have indicated that you can keep this money for 10 years and that you really need it for 10 years, although you can invest it only one-time lump sum. Once you have a 10 year horizon, equity comes into play.

Depending on your other assets, I think you have other investments as well we could advise between a balanced fund or an equity fund. I think 10 years is long enough for you take a fairly large exposure on equity. I would suggest that you put this in a liquid fund and through a systematic transfer plan. Don't do this one shot lump sum investment in an equity fund. Maybe over 24 months or maybe over 12 months transfer this either into a balanced fund or into a large cap fund.

A balanced fund could be an HDFC Prudence or a Reliance Regular Saving Balanced Fund. If it's a large cap fund you are looking at, it could be Franklin Bluechip, a DSP Blackrock Top 100 or an HDFC Equity. Pick one. I think the amount is not large enough for you to do more than one. So just pick one. Put it in a liquid fund and systematically transfer it over 24 months into one of these funds that I spoke about and do a review of your existing investments as well.