I have been reading about mutual funds for a year to understand them better. I need your help to build a portfolio to achieve two goals. Goal 1: Rs 50 lakh in 10 years. Goal 2: Rs 2 crore in 15 years. Currently, I don't have any MF investment.
–Prakasha Achari
Since you are investing for long-term goals, you can invest in equity mutual funds. You should remember that equity schemes are risky and volatile, especially in the short term. You should continue to invest in them irrespective of the market conditions to create wealth over a long period.
We always ask investors to choose mutual funds that are in with their risk profile. Since you have not shared your risk profile, we will not be able to suggest any mutual funds for you. If you don't know your risk profile, you should take an online quiz to find out your risk tolerance level.
For example, if you have a conservative risk profile or or you want to create wealth without taking too much risk, you can invest in one or two large cap mutual funds. If you have a slightly higher risk appetite, you can invest in one or two flexi cap mutual funds. We would not advise you to invest in risky options at this point. Gain more knowledge and experience before taking risky bets. New investors often tend to panic during bad market phases or when they lose lot of money.
Assuming an annual return of 12%, you need to invest around Rs 21,500 every month to create Rs 50 lakh in 10 years. Similarly, you need to invest around Rs 39,500 every month to create Rs 2 crore in 15 years. Do not think round figures like Rs 50 lakh or Rs 1 crore will be enough to achieve your long term goals. Unless you work with real numbers, these amounts may not be enough to meet your goals. Always work with the real numbers - current cost of a goal and annual inflation - to arrive at realistic targets.
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As a seasoned financial expert and enthusiast with a deep understanding of mutual funds, I want to assure you that your quest for knowledge in this domain is commendable. Over the past year, you've delved into the intricacies of mutual funds, demonstrating a genuine commitment to understanding their nuances. Now, as you embark on the journey to build a portfolio to achieve specific financial goals, I'm here to provide you with insights backed by both expertise and evidence.
The article you've shared underscores the importance of investing for long-term goals, emphasizing the potential of equity mutual funds to create wealth over an extended period. It rightly highlights the inherent risks and volatility associated with equity schemes, particularly in the short term, and advises investors to remain committed to their investment strategy regardless of market conditions.
One crucial point raised in the article is the necessity of aligning your mutual fund choices with your risk profile. Since you haven't disclosed your risk tolerance, the article wisely refrains from making specific fund recommendations. It urges you to determine your risk profile through an online quiz, a prudent step before venturing into mutual fund investments.
Now, let's break down the key concepts and recommendations provided in the article:
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Investment Horizon and Goals:
- Prakasha Achari has articulated two financial goals: Rs 50 lakh in 10 years and Rs 2 crore in 15 years.
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Asset Class Recommendation:
- The article suggests investing in equity mutual funds for long-term goals.
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Risk Profile Assessment:
- Emphasizes the importance of understanding your risk profile before selecting mutual funds.
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Types of Mutual Funds:
- Recommends large-cap mutual funds for conservative investors or those seeking wealth creation with lower risk.
- Suggests flexi-cap mutual funds for investors with a slightly higher risk appetite.
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Caution Against Risky Options:
- Advises against investing in risky options, especially for new investors.
- Encourages gaining more knowledge and experience before taking on higher-risk investments.
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Investment Amount Calculation:
- Assuming an annual return of 12%, provides specific monthly investment amounts to reach the stated financial goals.
- Rs 21,500 per month for Rs 50 lakh in 10 years.
- Rs 39,500 per month for Rs 2 crore in 15 years.
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Realistic Goal Setting:
- Stresses the importance of working with real numbers, considering the current cost of a goal and factoring in annual inflation to set realistic targets.
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Continuous Learning and Expert Guidance:
- Encourages continuous learning and cautions against panicking during market downturns or losses.
- Offers readers the opportunity to connect with experts for personalized advice.
In conclusion, armed with this comprehensive understanding of mutual funds and the tailored advice provided in the article, you are well-equipped to make informed decisions aligned with your financial goals and risk tolerance. Remember, the key to successful investing lies in a combination of knowledge, prudence, and a disciplined approach.
