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Ramalingam Kalirajan |7097 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 08, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Mehdi on Apr 30, 2024Hindi

I have 10k ? i want to invest in mutual funds for long term(20 to 25 years). Please suggest a good mutual fund.

Ans: With a long-term investment horizon of 20 to 25 years, you have the opportunity to benefit from the power of compounding and potentially achieve significant wealth accumulation. When selecting a mutual fund for such a duration, it's essential to prioritize factors like growth potential, risk tolerance, and diversification. Here's a recommendation:
Consider investing in a diversified equity mutual fund with a proven track record of delivering consistent returns over the long term. These funds invest in a diversified portfolio of stocks across various sectors, offering growth potential while mitigating specific stock risks. Look for funds with a strong performance history and a well-defined investment strategy aligned with your risk profile.
While I can't provide specific scheme names, I recommend focusing on funds with the following characteristics:
1. Long-term Performance: Look for funds that have consistently outperformed their benchmarks and peers over extended periods, ideally spanning multiple market cycles. Historical performance can provide insights into the fund's ability to generate returns over the long term.
2. Fund Manager Expertise: Evaluate the expertise and experience of the fund manager managing the scheme. A seasoned and skilled fund manager can navigate market volatility and make informed investment decisions to optimize returns for investors.
3. Diversification: Choose funds that offer broad diversification across market segments, including large-cap, mid-cap, and small-cap stocks. Diversification helps spread risk and capture growth opportunities across different sectors and market capitalizations.
4. Low Expense Ratio: Opt for funds with a competitive expense ratio, as lower expenses can enhance returns over the long term. Compare the expense ratios of different funds within the same category and select one with a cost-effective fee structure.
5. Risk-adjusted Returns: Assess the fund's risk-adjusted returns, considering factors like volatility and downside protection. Funds that offer attractive risk-adjusted returns tend to deliver smoother investment journeys and better wealth accumulation over time.
6. Consistency of Strategy: Choose funds with a disciplined and consistent investment strategy that aligns with your investment objectives. Avoid funds that frequently change their investment approach or deviate from their stated objectives.
7. Review Fund Holdings: Review the portfolio holdings of the fund to ensure alignment with your risk appetite and investment goals. Pay attention to sectoral allocations, stock concentration, and any significant deviations from the benchmark index.
Before making any investment decision, I strongly recommend consulting with a Certified Financial Planner (CFP) who can provide personalized advice based on your financial situation, goals, and risk tolerance. A CFP can help you select the most suitable mutual fund and create a well-rounded investment strategy tailored to your long-term objectives.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.