The general rule of investment says: invest when the market is low and sell when it is high. It holds true for stocks as well as mutual funds as both are market-linked. Since the domestic indices- BSE Sensex and Nifty 50- are scaling new heights every other day, it's a win-win situation for a lot of investors who are riding the tidal wave of the rising market.

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While they are cashing in on the positive market sentiment, what are the prospects for those who are eager to begin their mutual fund investment journey?

Should they take a step ahead and invest their money right now, or should they step back and wait for a market correction?

Should one lean towards equity funds, or should they pick comparatively safer bets like debt funds, index funds, or equity-linked saving schemes?

Likewise, what should be the strategy for seasoned mutual fund investors who have already invested their money in the market?

Is lump-sum investment the right strategy, or should one opt for a more disciplined method of systematic investment plan (SIP)?

ZeeBiz spoke to market leaders who gave their views on how investors should prepare their mutual fund investment strategy amid stock market rallies and a high interest rate.

Adhil Shetty, CEO, BankBazaar.com, says that mutual fund investors should take a long-term view of equity and debt investment options and should opt for systematic and disciplined investment.

"Systematic and disciplined investment every month will help you achieve your goals regardless of when you start. Interest rates are plateauing and may be poised for a reduction in 2024, though it’s hard to guess when rates will fall. As and when the rates fall, debt mutual funds with long durations will provide above-average performance."

Shetty says equity funds will also fare well if interest rates fall in the upcoming months.

He advises beginners to start their journey with index funds, as they are comparatively stable compared to actively managed equity funds.

"Beginners to both markets are advised to start their investment journey with index funds. A Nifty50 index fund, for example, is a good starting point because it gives you a low-cost way to invest in 50 of India’s largest companies through a single fund." 

He says novices can also opt for ELLS funds, which are diversified and provide a long-term view.

"Novice investors may also consider ELSS funds, which have three-year lock-ins and provide a more diversified approach to stock-picking as they include smaller companies with high growth potential."

Shetty says that at present, the SIP route is advisable for investors, but they can consider the lump-sum investment once the market corrects itself.

Vijay Kuppa, CEO, InCred Money, too, advocates investing through SIPs at present.

"With the risk and opportunities in mind, it would be prudent to invest in mutual funds through SIPs right now rather than lump sums. SIPs work the best since they inculcate discipline in investing, which in my view is one of the most important factors in creating wealth."

Speaking about market uncertainties, Kuppa says there are challenges, but the Indian economy is in a bright spot. "The Indian economy has been showing strength, as seen in the recent festive demand and the stronger than expected Q2 FY24 GDP. There are some risks to the equity markets like the global slowdown, expensive equity valuations, and impending general elections. Despite this, India is a bright spot with the infrastructure and consumption story intact."

What should be the investment strategy for a mutual fund investor? Kuppa says a beginner with a medium-risk appetite must have a diversified portfolio.

"As a beginner, if you have a medium-risk appetite, you can start creating a mutual fund portfolio with allocations to different types of funds. One can allocate 40–60% in large cap, flexi cap and multicap funds. We prefer Index funds for allocation to large caps. Hybrid funds with exposure to debt and equity can have a 15-20% allocation. The rest can be invested in thematic funds, mid- and small-cap funds."

Kuppa too, says that since interest rates in India are high, mutual fund investors can focus on debt assets.

"Other than these, considering that interest rates have been at their highest in the last few years, it makes sense to allocate to the debt asset class via instruments like debt mutual funds or directly to corporate bonds and lock in high interest rates."

Kaustubh Belapurkar, Director-Manager Research, Morningstar Investment Research India Private Limited, said that one should be patient, regular and give a time horizon of 7-10 years while investing in mutual funds.

"Investors shouldn’t be worried about market levels. When investing in equities, they should focus on having realistic return expectations, adequate investment time horizon of at least 5 years (ideally 7-10 years) and invest regularly. They should also be mentally prepared for short-term volatility in their portfolio."

Santosh Joseph, CEO and  Founder, Refolio Investments and Germinate Investor Services, also said that the mutual fund investor at present must have investment horizon of more than three years. "I think going forward the next 3 to 5 years offer a great opportunity. So if the investor does not mind holding for 5 plus years, I would recommend a 50-50% allocation with a luxury or liberty to increase more into equity as one understands risk and is able to mitigate risk by correct investing."

Belapurkar said that one should assess their goals and risk appetite before investing in mutual funds, "Investors should focus on assessing their goals, risk return objectives and investment time horizon which determines the suitable asset allocation for their portfolios. Based on this, the suitable asset classes, fund categories and funds can be selected. It is also important to invest regularly through SIPs and continue to stay invested despite market volatility."

Joseph also advises mutual fund investors to take investment decisions based on risk appetit. "I think one could begin with knowing what risk appetite the investor has got and I would allocate a good chunk of the money into equity and also ensure that some bit of the money is balanced out to create a stable portfolio in fixed income."

About the allocation, he said, "I would normally go with almost 50-50. I would put 50% of the money into equity and 50% into fixed income, and should an opportunity arise, I would try to take this equity portion higher but having understood the risks involved."