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Monday, October 2, 2017

On what basis we should decide to invest in which mutal funds?

On what basis we should decide to invest in mutual funds?

I found this question on quora, and for a moment I found this question inadequate to respond. Then I realised that this is a common question i come accross from many of my friends and relatives. And decided to write a post which may not be exactly comprehensive, yet it will lead to a better idea about mutual fund investments.

So my reply ------

This is a very broad based question. Still to answer you, mutual funds is an amazing investment tool. It is very flexible way of investment for investors where one can choose equity, debt, gold etc as an underlying asset depending upon the financial goal. 

Broadly in India, there are equity mutual funds, debt funds, gold funds and hybrid funds. There are sub categories under these to suit investors' needs.

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If one have an ultra short term goal of 0–12 months - chose luquid funds/ ultra short term debt funds

Goal - 12- 24months - you may look at short term debt funds, dynamic bond funds, credit opportunitues fund, even long term debt funds

Goal 24 - 36 months - you may look at debt hybrid funds, 0–30% equity 70- 100% debt. These funds give stability of debt rerurns, yet give an opprtunity to invest in equity which has higher return potential. However, it has a tax treatment like debt investment.

Goal - 36 - 60 months - one may consider  investing in (SIP) equity oriented hybrid funds with 60–70% equity and 20–30% debt. They give a significant exposure to equity with a nice cushion against volatitility with debt exposure. These funds give tax free return after 1 year.

If you have goal 5 - 8 years away, choose a large cap fund and invest through SIP.

Any goal beyond 8 years, do some research in mid-cap small cap funds.

If you are more specific and comfirtable sharing details interms of your goal, your age etc, would be able to help you with more specific information.
If you want to know more specific, do mail me at or tweet me @debashree_ad

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