I am 27 years old and want to invest in mutual funds. Please suggest some plans. Also, advise whether I should invest in growth schemes or dividend schemes.
-Name withheld on request
Considering your age, I suggest you invest at least 75% of your portfolio in equities. Since equities have outperformed fixed income securities by a huge margin over the long term, invest in equity funds with a tenure of more than 5 years. You can invest in the direct plans of these funds — Tata Index Sensex Fund or HDFC Index Sensex Fund; and Mirae Asset Emerging Bluechip Fund and Parag Parikh Flexi Cap Fund — through SIP in equal proportion. – Invest in the direct plans of Axis Long Term Equity Fund and Mirae Asset Tax Saver Fund —.
Since equities as an asset class can be very volatile in the short term, invest in short duration debt funds for financial goals maturing within 5 years. Also, make sure you maintain an emergency fund to cover unavoidable expenses for at least 6 months. You can invest in any of these direct plans of any of these short term funds – HDFC Short Term Debt Fund or ICICI Prudential Short Term Fund – to build your debt fund portfolio and park your emergency fund.
Always consider investing in growth options of mutual funds as it has high wealth creation potential. As your contribution remains invested in growth plans, the power of compounding begins and the returns generated by your mutual funds automatically start generating returns. Dividend option is also a sub-optimal option, especially for those living in higher tax slabs due to the tax treatment. Mutual fund dividend receipts are taxed as per the tax slab of the investor.
Naveen Kukreja – CEO and Co-Founder, Paisabazaar.com.
(Questions and thoughts at mintmoney@livemint.com)
Never miss a story! Stay connected and informed with Mint.
download
Our App Now!!
,