June 22, 2024

Have ₹5 lakh to invest? Experts recommend these asset classes for best returns in 2024

Just two weeks into the new year, and the market has already hit a new high, small and midcaps are believed to be overpriced, leaving investors wary to invest more in equity.

Given all this, where should investors invest their money in 2024? We asked a few experts where should one invest if they have 5 lakh and they believe a large majority of this sum should be allocated to large-cap mutual funds, while the remainder in debt securities.

The rationale behind investing in large-cap funds is that they are yet not overpriced, while investment in debt funds should be done for long duration since the interest rates have peaked and it is recommended to lock money in fixed deposits and other debt securities such as bonds and debt mutual funds.

Large-cap funds

One option to invest 5 lakh wisely is to allocate 70 percent i.e., 3.5 lakh in large-cap funds, while the remainder in debt funds.

Sridharan S, a Sebi-registered investment advisor and founder of Wealth Ladder Direct, says that one should invest 70 percent in the large-cap stocks since they are yet not overvalued. One should invest in growth stocks since the value stocks are already overpriced. The remaining money can be allocated to dynamic bond funds of 2-3 years’ duration, he explains.

ALSO READ: Amid the bull run, why should you invest in long duration debt mutual funds?

While giving reasoning for his optimism for large-cap stocks, Sridharan says, “As inflation eases, interest rates are likely to fall. This will be reflected in higher corporate earnings and, in turn, in the stock prices.”

Short term or long term

Experts also assert that the investing decision is a function of investment’s tenure i.e., whether investment is to be made for short term or long term. And if your financial goals are a still a long time away, it is advisable to not get carried away with the short-term volatility.

‘Buy right and sit tight!’ is the adage that works for long-term investors. Conversely, when you want to capitalise on short-term volatility and have some capital to invest, then you must be careful of where you invest now.

“I always advise my clients to invest their lumpsum towards their financial goals. So, if you have lumpsum then check if you need it for your short-term goal. If you are short of the target amount, then you can use this lumpsum for the same. Make short-term FD of this lumpsum,” says Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services.

And if you don’t need this money for short term, then you may use the same for the long-term goals, she adds.

“Although the market level is currently high, you can invest some part in equity in this allocation: choose large cap or index fund along with some allocation to flexi-cap. It’s better to avoid mid and small cap. When it comes to debt, you can opt for PPF/SSY or invest in NPS or Gilt fund,” adds Zende.

Renu Maheshwari, a Sebi-registered investment adviser, on the other hand, does not believe in short-term investing. “All money should always be invested around your life and financial goals. These 5 lakh shouldn’t be any different. Just because the calendar year has changed, the basics of investment shouldn’t change,” she signs off.

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