I want to invest Rs 10 lakh for the long term. What is the best way to invest to get better returns? I don't have any liability
Name withheld
Reply by Sushil Jain, CEO, PersonalCFO.in
We all know that the benefit of compounding starts only after 7 to 10 years of investment. We appreciate your decision to invest 10 years which gives you fairly good benefits of compounding. Based on risk profiling one can invest in different categories of funds to get optimum benefit of investment. We will discuss about three types of investors conservative, moderate and aggressive.
As the market is always high and moving in one direction, small corrections may occur, but in the long run, the market is positive as the fundamentals of companies are strong. To get a good return one should invest in the equity market. Gold has also given you a good return in the past few years but in the long run, we expect equity will outperform gold. However one should not invest in equity in one go as the market may go down in the short run. It’s better to do a systematic transfer plan from a hybrid fund to minimise the chance of short-term loss.
For conservative investors, it is advisable to invest debt hybrid fund and transfer it to a balance advantage fund in the next 18 months. For moderate clients, it is advisable to invest debt hybrid fund and then transfer it to a balance advantage fund in the next 18 months, from there in large and large & mid-cap funds in the next 18 months.
For aggressive clients, one can invest in a balanced advantage fund and then transfer it to mid-cap, small-cap and sectorial funds in the next 18 months. Before investing for the long term one must have sufficient funds as an emergency fund, adequate life and health insurance and a Will for estate planning.
(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)