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A retirement plan for a 19-year-old investor

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Last Updated: Jan 24, 2020, 11.29 AM IST
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Please guide me on how to make my mutual fund portfolio. I am 19 years old and I have 40 years to retire. I want to plan for my retirement. I can invest Rs 5,000 per month. I can take huge risks to compound my money. Should I invest Rs 5,000 in a small cap fund for 40 years or should I invest in another category? Also, suggest me the fund name.
-Sunil Kumar

You can easily create a mutual fund portfolio if you adopt a goal-based investment strategy. For example, if you start investing for your various financial goals - both short-term and long-term - you would automatically build a diversified portfolio. This is because you would choose debt mutual funds of appropriate horizon and risk profile to achieve your short-term goals, and suitable equity schemes to achieve your long-term financial goals.

Coming to your query, you need not take extra risk simply because you are young to compound your money. If you invest a small sum regularly without bothering about the market conditions, you would be able to create a large corpus over a long period. However, do not overlook your risk profile in your quest to make extra returns. Such daredevilry often ends badly - many investors lose their nerve when the market goes through a prolonged bear phase.

So, our advice is to stick to a relatively safer category like a multi cap that invest across market capitalisations and sectors. Meanwhile learn about mutual funds and basics of investments and once you gain some experience, invest in riskier options like mid cap and small cap scheme. A word of caution: at any point, if these investments are becoming too much to handle, seek the help of a professional mutual fund advisor.

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Once you start your career, try to save at least 30-40% of your salary. As said earlier, identify your goals, quantify them, provide for inflation and start investing regularly to achieve them.
(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)
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