Invest in equity-oriented mutual funds for the long term


My name is Nitish and I am 30 years old. My current in-hand salary is 44,000. My investments are as follows: Premium for term insurance ( 1,400 monthly for cover of 1 crore), company provided National Pension System ( 1,000 per month), and recurring deposit of 10,000 per month besides investment in mutual funds [HDFC Hybrid Equity Fund Direct Plan Growth( 1,000); DSP Equity & Bond Fund ( 1,125); L&T Hybrid Equity Fund Direct-Growth ( 1,000); Axis Bluechip Fund Direct Plan-Growth ( 1,000); ICICI Prudential Equity & Debt Fund Direct-Growth ( 1,000)]. I am Investing a total of 5,125 per month in these. Please advise whether these funds are suitable for the long term of up to 20 years, or should I change to some other mutual funds? 



Good to see that you have started your investment journey and at the same time have also ensured financial security for your family with the help of term life insurance. As you plan to create wealth over 15 to 20 years, you can certainly consider equity-oriented mutual funds to build it.

A couple of changes in your present investment strategy can work better for you as you intend to invest in for the long term. At present, you are investing 10,000 every month in recurring deposit (RD), which is usually used by investors who would like to accumulate a particular amount for near-term or short-term needs. If you have such an objective then you can continue with the same, else you can start investing a part of this RD in equity mutual funds for the long term.

Ideally, you should set aside 6 to 9 months of your mandatory monthly expenses in a bank account or fixed deposit as a contingency fund if it is not in place so far.

The other change that you may consider is to reduce your investment allocation in hybrid funds. Almost 80% of your monthly SIPs are getting invested in hybrid funds. While these hybrid funds invest almost 70-80% in equities, you may consider investing the same money in large-cap and index funds if your idea is to take less risk at this stage. At this stage, you can look at investing in equity-oriented funds as you are young and at the same time your goal is to invest for 15-20 years. The following are some funds you may consider for investing in through SIPs for your long term goal: Axis Bluechip Fund (you are already investing in it); any Nifty Index Fund; Mirae Asset Large Cap Fund; Parag Parikh Flexicap Fund; and UTI Flexicap Fund.


Harshad Chetanwala is the founder of Have personal finance queries? Email [email protected]

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