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Should I invest in large cap funds or aggressive hybrid funds?

ET Online|
Last Updated: Jun 05, 2020, 11.27 AM IST
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Summary If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

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I am working in a techno park. It has been only seven months since I started this job. I would like to invest in a large cap mutual fund for long time. Having read about it in ET, I guess ICICI Bluechip Fund, Axis Bluechip Fund, Nippon India Hybrid Fund are good choices for me. I am a bit confused.

I am planning to invest Rs 2,000 each in any two of these funds. Please help.
-Sharon Sara

Since you are just starting your career, you need to take care of a few things before starting your investment journey. First, create a contingency fund that you can use in an emergency like job loss, pay cuts, health crisis, etc. The fund should be large enough to take care of your living expense for three to six months. If you have financial dependents or facing a job threat, you should have a larger corpus. You can start a recurring deposit or an SIP in a liquid fund to create your contingency fund.

Next, get insurance covers. A health cover for you is a must. Do not bank only on the company cover. You will lose the cover when you leave or lose the job. So, always get an individual cover. If you have dependents, get separate covers for them, too. Similarly, if you have financial dependents, you should also get a large life insurance cover. Always a buy a pure term plan to secure a large life insurance cover.

Once you have taken care of your emergency fund and insurance covers, you may start your investment journey. It is always better to identify goals, find out the time you have to achieve them, put a number to each of them, and then find out how much you need to invest every month to achieve them. Do not forget to add annual inflation while calculating the target corpus need to meet your long-term goals. Money loses its value over a long period because of the impact of inflation. Unless you include inflation in your calculations, you would find that you don't have enough money to take care of your goal.

Since you have a long-term investment horizon and ready to take the risk, you may think of investing in equity schemes. It seems, you have a conservative risk profile? In other words, are you looking to build wealth without taking too much risk and volatility? If yes, then you have chosen the right mutual fund categories for you.

Aggressive hybrid schemes like Nippon India Hybrid Fund invest in a mix of equity (65-80%) and debt (20-35%). Due to the mixed portfolio, these schemes are relatively less risky and volatile than pure equity schemes that invest 100% in stocks. That is why these schemes are considered ideal for new investor and very cautious equity investors.

Large cap mutual funds, as the name denotes, invest in very large companies or top 100 companies by market capitalization. These companies are leaders in their respective fields and they are stable than other mid and small-sized companies. That is why these schemes are recommended to conservative equity investors looking to build wealth over a long period without too much volatility.

Here are some useful links:
Best aggressive hybrid schemes to invest in 2020

Best large cap mutual funds to invest in 2020

Since you are new to mutual funds, it would be a better idea to seek the help of a mutual fund advisor. It is not easy to take care of your investments on your own. Gain some experience and confidence before starting to take care of your investments.

(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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