Is it better to invest in large-cap funds for the long run?

Updated: November 27, 2019 8:42:06 AM

Exclusively choosing one market-cap category over another may deprive you of opportunities.

mutual fund investment, mutual fund, m cap, Gold Sovereign Bonds, bonds, gold ETFChoose equity mutual funds if you can remain invested for long periods (five years or more).

By Jayant R Pai

Is it better to invest in large-cap funds for the long run ?

– Ashutosh Swain

Choose equity mutual funds if you can remain invested for long periods (five years or more). Within these, the choice of the category is a matter of individual choice. The NAV of large-cap funds is less volatile than their mid or small-cap peers. However, exclusively choosing one market-cap category over another may deprive you of opportunities. Hence, invest in multi-cap funds as they offer a combination of stocks across categories (and even sectors and geographies).

Should I invest Rs 10,000 every month in a large-cap mutual fund for 10 years to create a education corpus for my son?

—Suryansh Gopal

Yes. It is a credible idea. You could consider a simple Index Fund investing either in the Sensex or Nifty 50, as it will provide you with exposure to large-cap stocks at a very low cost. Also, do not deviate from the course, and investing consistently over 120 months.

Should I buy physical gold like coins or invest in gold ETF/bonds?

—Navin Kumar

Financial variants of gold (ETF and Gold Sovereign Bonds) have advantages such as lower storage / security-related costs, standardisation, obviating purity and authenticity-related concerns, ability to purchase in smaller denominations, etc. Hence, look at ETFs / bonds.

I am 45 and will retire after 15 years. My monthly salary is around Rs 2 lakh. How much should I save for retirement factoring in inflation? What corpus should I have at the time of retirement?

—Gautam Uppal

The amount required at the time of retirement is not just a function of your income. The amount and duration of your debt burden and ability to save should be considered too, besides one’s psychological orientation towards various asset classes. My assumptions are: You have not taken on any debt; you can save 30% of your monthly income. You prefer to invest in equity mutual fund schemes; expected ‘real’ return (after factoring inflation) 3% per annum. Based on this, you should be able to accumulate a corpus of Rs 1.37 crore. This estimate does not factor in any increase in income (and savings). A financial advisor will be able to provide a more nuanced estimate, after procuring more details from you.

(The writer is Head, Products, PPFAS Mutual Fund. Send your queries to fepersonalfinance@expressindia.com)

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