Welcome to the Reader’s Query section of FE Money. In our last edition, Gokul G discussed his investment strategy, expressing his intent to allocate a significant portion, between 80-90%, of his investments into small and mid-cap funds. This long-term commitment spans a duration of 25-35 years, with the ultimate goal of achieving the "optimal returns" from the equity market. Gokul seeks insights into the suitability of his approach to long-term investing.
Certainly, your approach appears sound. You might consider allocating 20% of your investments to a large-cap index fund such as the UTI Nifty 50 Index Fund (G), allocate 40% to the Nippon India Growth Fund (G), and earmark the remaining 40% for the Franklin India Smaller Companies Fund (G). It's advisable to consistently review your investments on an annual basis.
It's important for readers to recognize that successful long-term investment planning should encompass various critical factors. These considerations should include elements like your future financial objectives, your comfort level with risk, and your capacity to absorb risk.
The common mistake of simply beginning with the question of "which fund to invest in" should be avoided. Also, selecting funds solely based on short-term past performance can potentially lead to losses in the long run. (You can find an illustrative example here.)
As Mayank Bhatnagar, the Chief Operating Officer at FinEdge, highlights in this article, investors like Gokul should commence their journey by assessing their cash flows, enabling them to establish robust long-term objectives.
Once you have a clear understanding of how much you can comfortably save and invest in a systematic and disciplined manner, it's crucial to educate yourself about the risks and rewards associated with mutual fund investing. Subsequently, you can begin your search for suitable funds to invest in. FE Money strongly recommends consulting a certified financial planner or a SEBI-registered investment advisor before embarking on your investment journey.
Disclaimer: The views and recommendations mentioned above are those of the respective experts and commentators. It is advisable to consult your financial advisor before making any investments.
