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Analysis

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Mutual funds to earn 12-18% returns in 10 years

If you have any mutual fund queries, message on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.

ET Online|
Updated: Sep 17, 2019, 02.14 PM IST
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I am 22 years old. I have started investing in three mutual funds through SIP of Rs 5,000 every month.
Axis Bluechip Fund: Rs 2,000
Parag Parikh Long Term Equity Fund: Rs 2,000
Axis Midcap Fund: Rs 1,000

My investment period is 5 to 10 years. I am investing in these funds for marriage and want to get healthy returns (average 12-18%). Is my portfolio good or do I need to replace or add any funds?

I can take moderately high risk. So, I am thinking of adding three mutual funds: L&T Midcap Fund, SBI Small Cap Fund or HDFC Small Cap and Mirae Asset Focused Fund. Are these mutual funds the best to get high returns? Or do I need to make any change?
--Shirish Dafda

You have very high return expectations from your mutual fund investments. You may hope to pocket around 12 per cent annul returns over 10 years.

If you have a moderate risk profile, you must invest mostly in multi cap mutual fund schemes. These schemes invest across market capitalisations and sectors and considered ideal for equity investors with a moderate risk appetite.

Here are our recommended multi cap schemes: Best multi cap mutual funds to invest in 2019

If you want to take a little extra risk (you say you have a moderately high risk profile), you may also consider taking some exposure to mid cap schemes. You can decide the percentage of mid cap in your portfolio depending on the extra risk you want to take for extra returns.

However, you should avoid small cap schemes as they are meant for aggressive investors with a very high risk appetite and ability to withstand extreme volatility.

Do not chase returns. You should always choose your mutual funds based on your financial goals, investment horizon, and risk profile. If you focus only on returns, you would end up with wrong investment choices with very high risk element. And you would find it difficult to continue with your investments when the market gets into a bad phase. For example, small cap schemes are down 17 per cent in the last one year.
(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)

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