Anyone should choose their mutual fund investments based on your goals, investment horizon, and risk profile. First, identify your financial goal. Is it a short-term goal or a long-term goal? If the goal needs to be achieved in less than five years, consider it as a short-term goal. If you have more than five years to achieve the goal, it is a long-term goal.
For short-term goals, you should invest in safer investment options like bank deposits and debt mutual funds. The rationale is that you should not expose your money to extra risk when you don’t have much time in hand. However, when it comes to long-term goals, you should go for equity mutual funds. Equity or stocks have the potential to offer superior returns than other asset classes over a long period. This is why it is considered ideal to meet long-term goals.
As for investing a small amount, well, it is considered the best way to meet your long-term financial goals. Investing a small sum regularly over a long period is the best strategy to create wealth.
I am 23 years old and want to invest Rs 5,000 per month through SIP. I am a student.
I want to invest in three types of mutual funds:
1. Largecap (SBI Blue Chip Fund or Kotak Select Focus Fund)
2. Midcap (Mirae Asset Emerging Bluechip Fund)
3. Multicap (SBI Magnum or ICICI Pru AMC)
Which funds should I choose to invest and in what ratio?
I have a time horizon of 25 to 30 years. Kindly advise
For largecap you should go for Kotak Select Focus instead of SBI Blue Chip Fund, as in comparison Kotak’s scheme has given 20 per cent CAGR returns compared to 17.7 per cent CAGR returns.
For midcap you can consider IDFC Sterling Equity Fund as it has performed very well in this category in last two years. In last one year the scheme has outperformed index and has given 30 per cent CAGR return.
For multicap, you can go for SBI Magnum Multicap as it outperformed ICIC Pru Multicap Fund by six per cent y-o-y basis.
Ratio could be 50:35:15 in midcap, multicap and largecap, as you have very good long term period for your investment I would prefer more tilt towards mid cap.