personal finance

Ideal mutual fund portfolio for a young investor


I am 22 years old and just starting my first job. I am planning to build a mutual fund portfolio, mainly focussed on mid cap and small cap schemes through SIPs. But seeing how the mid caps and small caps performed last year, I am not sure about what is the right way to go ahead. Can you also share the appropriate portions of small, mid and large cap SIPs for a portfolio aiming at returns.
–Rahul Gariya

You should always focus on your goals, investment horizon, and risk profile while choosing your mutual fund scheme. Do not base your investment decisions on the prevailing trends in the stock market. For example, the mid cap and small cap schemes haven’t performed well last year, but these schemes were ruling the chart two years ago. For example, they are topping return chart in both five and 10-year periods with an average return of over 15 per cent. Now, would you go for them? The point is: do not let great returns or short-term bad performance influence your investment decision. Always remain focused on your investment objective. And never forget your risk profile.

How would you go about it? First, try to identify your various financial goals. For short term goals, you should stick to bank deposits and debt mutual funds. If you are investing in debt mutual funds, try to choose scheme that matches your investment horizon. For your long-term goals, you may choose equity mutual funds. However, you should ensure that the schemes are in line with your risk profile and investment horizon. For example, if you are a conservative equity investor with an investment horizon of five to seven years, you should invest mostly in large cap mutual funds. If your risk appetite is moderate, you should opt for multi cap schemes. You should invest in mid cap and small cap schemes only if you have a very high risk appetite and a longer investment horizon of seven to 10 years. These schemes, as you have pointed out in your mail, can be extremely risky and volatile. Only investors with an appetite for high risk and stomach for volatility should invest in them.

If you are new to mutual funds and not very familiar with the basics of investing, you should seek the help of a reliable mutual fund advisor. You should take care of your investments on your own only after gaining enough experience and confidence after a few years.





READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.