My query is: when is the right time to invest a lumpsum in a mutual fund? I am not in a position to invest through SIP. My goal is wealth creation. My investment horizon is three years. My risk profile is moderate to high.
When you are investing for a short period of three years, your priority should be to protect the capital. Therefore, you should try to invest the money in bank deposits or short-term debt mutual funds. You can always invest a lumpsum in debt mutual funds. Mutual fund advisors discourage investors from making lumpsum investments in equity mutual funds, as they believe it is always better to stagger investments in equity funds. This is mainly to rule out the possibility of entering the market at a certain level and average the purchase cost.
Debt mutual funds has the potential to offer you a marginally higher returns as they offer market-linked returns. However, if you are investing a modest sum, it will not make a big difference to you. So, it is entirely up to you to decide whether you want to park the money in a bank or in short term debt funds.
A word of caution: When you are investing for a short period, you should be very careful. Do not invest in high risk options because you do not have the time to recover if there are any losses. When you are investing for a short period, as said earlier, your priority should be to preserve your capital and earn some returns.