Invest in long-term equity-focused mutual funds



My name is Nitish and I am 30 years old. My current salary is ??44,000. My investments are as follows: Term insurance premium ( ??1,400 per month for the coverage of ??1 crore), the company provided the national pension system ( ??1,000 per month) and a recurring deposit of ??10,000 per month plus investments 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 invest a total of ??5,125 per month in these. Please indicate if these funds are suitable for the long term, up to 20 years, or should I switch to other mutual funds?


It is good to see that you have started your investment journey and at the same time have also secured the financial security of your family with the help of term life insurance. Since you plan to build wealth over 15-20 years, you can definitely consider equity-focused mutual funds to build it.

A few changes in your current investment strategy may work better for you because you intend to invest for the long term. Currently you are investing ??10,000 each month in recurring deposit (RD), which is typically used by investors who wish to accumulate a particular amount for short or short term needs. If you have such a goal, you can continue with the same, otherwise you can start investing some of that R&D in long term equity mutual funds.

Ideally, you should set aside 6-9 months of your mandatory monthly spending in a bank account or fixed deposit as a contingency fund if it hasn’t been in place so far.

The other change you can consider is reducing your investment allocation in hybrid funds. Almost 80% of your monthly SIPs are invested in hybrid funds. Although these hybrid funds invest almost 70-80% in stocks, you may want to consider investing the same amount in large-cap and index funds if your idea is to take less risk at this point. At this point, you can consider investing in equity-focused funds when you are young and at the same time your goal is to invest for 15-20 years. Here are some funds that you can consider investing in through SIPs for your long-term goal: Axis Bluechip Fund (you are already investing there); any Nifty Index Fund; Mirae Asset Large Cap Fund; Parag Parikh Flexicap Fund; and UTI Flexicap Fund.

Harshad Chetanwala is the founder of Do you have questions about personal finances? Send an email to [email protected]

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