Welcome to the Reader’s Query segment of FE Money. Last week, Gokul G shared with us that he wants to make 80-90% of his investments in small and mid-cap funds for a very long term of 25-35 years. He aims to do so to get the “best returns” from the equity market. Gokul wants to know whether his approach to long-term investment is right.
Kunal Jain, Senior Consultant at Alpha Capital, RIA, answers Gokul’s query:
Yes, your approach is right. You may consider 20% exposure in large-cap index fund – UTI Nifty 50 Index Fund (G), 40% exposure in Nippon India Growth Fund (G) and the remaining 40% in Franklin India Smaller Companies Fund (G). Please continue to monitor every year.
Readers should note that it is important to look at a number of factors for any long-term investment planning. These factors include important considerations like your future financial goals, risk appetite and risk capacity.
Ideally, one should not make the common mistake of starting off with “which fund to invest into”. Also, selecting funds based on short-term past returns may lead to losses in the long run. (See an example here)
As Mayank Bhatnagar, Chief Operating Officer at FinEdge, says in this article, investors like Gokul should begin their journey with an evaluation of their cash flows so that they can set up healthy long-term targets.
After knowing how much amount you can comfortably save and invest in a systematic and disciplined, you should educate yourself about the risks and rewards of mutual fund investing. After that, you can start looking for suitable funds in which you can invest. FE Money recommends consulting a certified financial planner or a SEBI-registered investment advisor before starting your investment journey.
Readers may also benefit from the 3 Bucket Approach of automating savings and investments suggested by Arun Kumar of FundsIndia in this article.
Have any personal finance queries? Write to fe.money@financialexpress.com. We will get relevant queries answered by personal finance experts.
Disclaimer: Views and suggestions mentioned above are those of the respective experts/commentators. They do not reflect the views of financialexpress.com. Please consult your financial advisor before investing