I am a senior citizen of 72 years. I want to invest some money with mutual funds to get a 15-16% return in 5-6 years. Kindly advise what mutual fund I should invest in. Shall I invest in a lump sum or in SIP please elaborate.
Reply by Sushil Jain, CEO, PersonalCFO.in
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We appreciate that you consider mutual funds as an option for your investment. A mutual fund is a good option to get a better tax-efficient return if you have a long-term horizon. Before investing in a mutual fund you must do your risk profiling and based on that you should do your asset allocation. Asset allocation is a must to get better risk-adjusted returns from your investment.
The mutual fund gives better returns than fixed deposits. Based on your time horizon and risk profile you can choose one or more categories of funds from the following.
1) Debt Hybrid fund
2) Equity hybrid fund
3) Diversify equity fund
As you know there are no fixed returns in mutual funds but you can expect around 8% - 10% in Debt hybrid funds, around 10% - 12% in equity hybrid funds and 12%-15% in equity funds if you have a long-term horizon.
Prior to making any investment decisions, it's crucial to grasp that hybrid funds fall within the risk spectrum, sitting between debt and equity funds. While they typically yield higher returns compared to debt funds, they carry more risk but are deemed safer than equity funds. Additionally, mutual funds inherently entail higher risk than fixed deposits due to their reliance on stock market fluctuations (for equity funds) and interest rate movements (for debt funds) to determine returns. It's advisable to allocate a portion of funds for daily expenses and emergencies before delving into equity investments.
If you have a lump sum to invest then you should go for a Systematic Transfer Plan (STP) in place of a Systematic Investment Plan (SIP). Invest in a debt hybrid fund and give instruction to monthly transfer to an equity fund or equity hybrid fund based on your risk profiling, it will give you a better return without timing the market.
SIP is suitable for an investor who has no lump sum fund but has a regular inflow to invest. If you have a regular source of income then you can invest through SIP in equity hybrid or diversify equity fund.
Apart from the above you must do proper nomination in all funds and prepare a Will for all your investments as a part of your estate planning
(The views and investment tips by investment experts are their own and not that of Business Today. Readers are encouraged to consult a qualified financial advisor or a SEBI-registered investment advisor before making any investment decision)
