Don't invest lump sum at market peaks

Investing heavily in a top-performing fund during good times can cause long-term pain

When the BSE Sensitive Index, or Sensex, is at 32,500-odd points, there would be few naysayers about the prospects of the Indian markets — a similar situation as in 2007. And many investors got sucked into this enthusiasm.

On December 31, 2007, Vibhav Kumar, a Noida-based entrepreneur, went to a party where he heard a friend boast about the killing he had made in the stock markets that year. Kumar decided that he, too, would make a fortune by investing in equity mutual funds. The next day, he invested Rs 1 lakh in JM Basic Fund, 2007’s best-performing diversified equity fund.