How To Invest Rs. 10 Lacs In Mutual Fund
- 26 Oct, 2023
byAcquaint Capital- Investments
Investing your hard-earned money prudently is a significant decision to secure your financial future. It offers an opportunity to grow your wealth, meet various financial goals, and secure your future. To make the most of this investment, it's essential to allocate your funds wisely, depending on your objectives. We will explore How to invest your Rs.10 lakhs in mutual funds, with a focus on Risk,Diversification and returns to meet your financial goals.
Before Investing in Mutual Funds It is important to understand your Financial Goals. Are you looking to build an emergency fund, cover short-term expenses coming in 1-3 years , Save for your child's education, or plan for your retirement? Each of these objectives requires a unique approach to investment.
- Emergency Funds: Life is unpredictable, and unexpected expenses can arise at any time, whether it's medical bills, home repairs, Job switch or job loss. An emergency fund provides a safety net, preventing you from going into debt or depleting your long-term investments in times of crisis. So You need create an Emergency Fund to cover atleast 6 months of Expenses. if You are monthly expenses are Rs. 50,000 then Invest Rs. 3 lacs a portion Rs. 10 Lacs in Low risk and short term debt Funds. It can grow with the pace of Inflation and remain accessible when needed.
- Short-Term Expenses (Within 3 Years): Short-term expenses, such as buying a car, taking a vacation, child's education expenses or making a down payment on a house, require mix of Balanced approach. Hybrid Funds or Balanced Advantage Funds can have limited downside and good upside. In the past such funds delivered returns between the range of 6% to 12% and these Funds are Tax efficient compare to other financial Instruments. It ensures that your funds are relatively stable and easily accessible when you need them.
- Long Term Goals : Kids Education and Retirement planning Kids Education and Retirement Fund are as important as your Emergency Fund. Since Kids Education and Retirement planning are long term Goals. Equity Funds are Ideal option to Invest, You get sufficent time horizon to invest and It mitigates the stock market volatility. There are many categaries of Equity funds exists in the market. I will suggest following are catergories to Mutual Funds who offer consistency and maximise returns.
- Large Cap / Flexi Cap Fund : Allocate 40% to 60% in Large cap or Flexi Fund of your Equity Fund allocation. Large Cap Funds primarily invest in Top 100 Companies who covers major portion of our economy. Flexi cap Funds invest across Large Cap, Midcap and Smallcap but majority of portion in large cap funds. Hence Large cap and Felxi cap Funds offer stable and consistent returns in our portfolio.
- Midcap Funds : Allocate 20% to 50% in Midcap Funds. Midcap Funds are categories market cap between Rs. 10,000 crores to 30,000 crores. Midcap Funds are volatile at the same time offer high returns compare to large cap Funds. In Last 10 Years Nifty Midcap Index has delivered 17.75% CAGR.
- Small cap Funds : You can allocate 10% to 20% in small cap Funds. This is very volatile category in equity mutual Funds. Many good stocks fall in small cap category. small portion of your investment can help you to maximise your wealth through smallcap fund.
Investing in mutual funds can be an effective way to grow your wealth, provided you approach it with a well-thought-out strategy and a clear understanding of your financial objectives. With the right allocation and a long-term perspective, you can make the most of your Rs. 10 lacs and secure your financial future.