Instead of monthly shifts from Debt to Equity, we can consider converting the whole of Debt units to equity units when PE ratio falls below 14.
This way our monthly instalment remains Rs.4000.
When PE is below 14, our monthly instalment of Rs.4000 goes to Equity MF. We convert whole of Debt units to Equity units when PE is hovering below 14.
When PE raised above 14, Rs.2000 goes to equity and Rs.2000 goes to Debt.
When PE raised above 24, Rs.1000 goes into equity on alternate months and Rs.4000 and Rs.3000 goes to Debt on alternate months. Additionally, we convert whole of Equity units to Debt units when PE raises above 24.
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As of today, PE is around 23. So, this month Rs.1000 goes to equity and Rs.3000 goes to Debt.
Hello
Converting the whole investment at a go, has huge implementation problems
Believe me, been there done that
Instead have a clear plan in place to convert the invest-able amounts in terms of % based on Historical PE values, because any kind of projections is just mind games . . .
Recently was involved in making a plan for a new investor (family member) where along with SiP a lump sum had to be invested . . .
Initially went in 100% to debt as we were around 22+,
started investing in MFs below 20 (that was the per-decided trigger)
The folio was being build for a young person, so risk taking capacity + time horizon was big
Below 20 specific amounts were moved to MFs periodically,
so here 2 things are in play, value as well as time.
As the markets did not stay down for long and moved up rapidly only about 40% of the Lump Sum funds could be invested. . .
In about 6/8 months funds with Motilal Oswal & ICICI are up by 20-22%,
Franklin Templeton 30% and Blackrock is up by 40%, average gains of 25+%
If we had waited for PE of 14, then keeping on the sidelines of a bull market becomes frustrating.
Anyway, we cannot make formulas that fit everyone,
But rule of thumb for an investor is to Buy Low and Sell High
And use historical ratios to decide what is High and what is Low
Make a fixed and elaborate plan and keep investing for wealth generation
Happy