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Can I park a lumpsum in index mutual funds for 15 years?

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Last Updated: May 12, 2020, 11.06 AM IST
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Summary If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

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I have Rs 1.8 lakh. I want to invest it for 15 years or so as lumpsum in mutual funds. Is it advisable to have this amount parked in series of index funds?
-Hariprasath


Since you have a long-term investment horizon, you may can invest the money in equity mutual funds. However, you should choose the mutual fund category based on your risk profile. For example, if you are a conservative equity investor who is looking to create wealth over a long period without much volatility, you may consider investing in large cap mutual funds. If you have a moderate risk profile, you may choose multi cap mutual funds. If you have an aggressive risk profile, you may choose mid cap or small cap based on how much risk you are willing to take.

Further, your decision to go for index fund or actively-managed funds depends on which investment strategy you want to adopt. If you want to opt for a passive investment strategy, you may choose an index funds instead of an actively-managed fund. An index fund is a passively-managed scheme that invests in an index in equal proportion. In active fund, the fund manger decides the allocation based on his outlook.

In developed countries, it has been proved that it is not possible to beat the market regularly over a long period. That is why low-cost index funds and ETFs are a preferred option there. However, many experts believe that actively-managed schemes may continue to outperform their respective benchmark indices in a developing market like India, at least for a decade.

(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)

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