Answer Book question
For money you will not touch for ten-plus years, history slightly favours investing at once. But most people cannot stomach a 20 percent fall the month after investing ₹25 lakh, and the regret makes them sell. Spreading it over six to twelve months via an STP costs a little expected return and buys a lot of staying power.
For money you will not touch for ten-plus years, history slightly favours investing at once. But most people cannot stomach a 20 percent fall the month after investing ₹25 lakh, and the regret makes them sell. Spreading it over six to twelve months via an STP costs a little expected return and buys a lot of staying power.
A returning NRI invests ₹40 lakh in equity funds in one go. The market falls 18 percent over the next two months. He sells everything, losing ₹7 lakh, and never invests in equity again. Had he staggered over a year, the same fall would have been a buying opportunity for the unplaced portion.
Lump-sum maximises time in the market. Staggering reduces the chance of a terrible entry point and, more importantly, reduces the chance of a behavioural mistake. The right answer depends on your temperament more than on maths.
Size of the sum relative to your total wealth Your honest reaction to a 20 percent fall Horizon Whether you have ever held through a downturn
Pretending you have the temperament for lump-sum because a spreadsheet says it is optimal.
Large lump sums in Kerala usually arrive from land sales, Gulf savings or retirement benefits. once-in-a-lifetime money. Stagger it.
₹25 lakh: park in a liquid fund; STP ₹2 lakh/month into equity funds over 12 months. After a year, fully invested with an averaged entry.
For a small sum relative to an already-large portfolio, lump-sum is fine.
Park in a liquid fund Set up a 6–12 month STP Do not check daily
What is an STP? I sold land and received ₹25 lakh. What should I do first?
Kerala Rising Money · NRIs & returning Malayalis
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