7th pay commission date nears: Mutual fund could be a preferred option as it provides you the opportunity to benefit from equity and debt and balance your risks according to your age.
With the 7th Pay Commission likely payout date of August 1 nearing, FeMoney has been bringing you various ways to deal with the money you would receive as arrears and the increased pay packet and suggesting you where to invest the surplus.
Proper asset allocation would be the key to long-term wealth creation. Among financial instruments, a heavy portfolio bias towards equity would be fraught with risk, while too much allocation towards debt might be detrimental to wealth generation as it would not allow your investment to beat inflation by a decent margin.
As such, mutual fund could be a preferred option as it provides you the opportunity to benefit from equity and debt and balance your risks according to your age. It also protects you from the vagaries of the market in case your are not a savvy investor. Your money is in safe hands with professionals handling it with strong research backing.
“The strategy to accumulate wealth through mutual funds is sound. Mutual fund is one of the best asset class that provides better inflation-adjusted return coupled with liquidity. An investor can choose from a bouquet of products that could suit them based on their time horizon, risk appetite and objective,” S Sridharan, Head, Financial Planning and Advisory, Fundsindia, told FeMoney.
Sridharan says a person’s investment strategy should be based factors such as time of investing and risk profile. “It is always advisable to discuss the time horizon, risk appetite and the objective with the financial advisor and have to take the investment decision. Because, one fund may not fit for all is applicable for mutual funds,” he said.
Manoj Nagpal, CEO, Outlook Asia Capital, a financial planner, says mutual funds should form an integral part of a government employee’s portfolio. “Govt employees could consider saving across instruments like fixed deposits, mutual funds and small savings, among others. People in the higher age bracket closer to retirement should keep liquidity in mind and lesser volatile instruments like fixed deposits and debt mutual funds, whereas in the younger age brackets – depending on their risk profile – could evaluate equity mutual funds among other options,” he said.
Nagpal and Sridharan collated 10 best mutual fund schemes that could work well for you for the long run.
Nagpal’s best picks:
Among large-cap funds: Birla FrontLine Equity fund, Kotak -50
Among multicap funds: HDFC Capital Builder
Among mid-cap funds: Mirae Emerging Bluechip
Equity-linked Savings Scheme (ELSS): Birla Tax Relief and DSP Tax Saver.
Sridharan best picks:
Sridharan handpicked for us some funds on the assumption of an investor with the age of 35, holding period of 10 years with an objective of planning for child education. “Since the time horizon is 10 years, it is advisable to have an asset allocation of 70:30 where 70 per cent investment in equity and 30 per cent in debt.
He advises spreading mutual fund investment over the following funds and in percentage allocation as indicated: