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How should a student invest in mutual funds?

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ET Online|
Nov 27, 2019, 04.25 PM IST
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I am a 21-year-old student. I don't have a regular income. I invest a small amount as a lumpsum whenever I can. I know I am a new mutual fund investor and the amount is small, but can you please review my portfolio? Should I keep investing in them for a longer period or look for something else?

Motilal Oswal Long Term Equity Fund - direct,growth - Rs 1,500
SBI Equity Hybrid Fund - direct, growth - Rs 1,000
Axis Long Term Equity - direct, growth - Rs 1,000
Motilal Oswal Focused 25 Fund - direct, growth - Rs 1,500
Sundaram Select Focus Fund - direct, growth - Rs 1,500
Aditya Birla SL Digital India Fund - direct, growth - Rs 1,000
Mirae Asset Tax Saver Fund - direct, growth Rs 1,000
Mahindra Ultra Short Term Yojana - direct, growth - Rs 1,200
Axis Liquid Fund - direct, growth - Rs 800
Motilal Oswal Multicap 35 Fund - direct, growth - Rs 800
Motilal Oswal Large and Midcap Fund - direct, growth Rs 700

As mentioned earlier, all these investments are in lumpsum. If they are good, then I will keep investing in them. Kindly advise.
- Deepak Singh

We always ask investors to choose their mutual funds based on their goals, investment horizon, and risk profile. You have chosen many schemes without applying any thought to them. You should always choose mutual funds based on your risk profile. Do not fall into the trap of I am young, and I can take high risk. Do an online quiz to assess you risk profile and start investing in one or two schemes that are in line with your risk profile and investment horizon.

If you are investing for a long period and ready to take risk, you should consider investing in equity mutual funds. If you are investing for a short period and want to play it safe, you should stick to debt mutual funds and bank deposits.

If you are a very conservative equity investor looking to invest for a long period, you should invest in large cap mutual funds or aggressive hybrid schemes. If you have a moderate risk profile, you can invest in a multi cap mutual fund schemes. Multi cap schemes invest across sectors and market caps based on the outlook of the fund manager. They are ideal for investors who want to have a meaningful exposure to sectors and market capitalisations that are in vogue.

Investing in a large number schemes across different categories would not teach you anything about investing. Different categories and sectors perform differently at different phases in the market. You would draw wrong conclusions when you review your portfolio.

Investing in a multi cap scheme (or large cap schemes or aggressive hybrid scheme if you are very conservative investor) and holding on to them for a long time, would offer you a valuable lesson in creating wealth over a long period. Investing a small amount regularly over a long period is the secret behind long-term wealth creation.
You can also read: DIY investors' guide to mutual funds

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