Mutual funds to invest a lump sum of Rs 5 lakh

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I have a lump sum of around Rs 5 lakh. I want to invest it in equity mutual funds. Looking at the growth in 2020, I’m very skeptical if there’s any potential for growth in 2021. Which mutual funds (large cap, mid cap, flexi cap, etc) should I invest in and what sectors should I target (or do I invest in non-sectoral funds)?

-Jay Mangal

Equity mutual funds are typically recommended to long-term investors looking to create wealth. It is not meant for investors looking to park money for a short period. Equity does not provide linear returns. A year or few years of good market performance may be followed by a bad patch. That’s why equity is suitable only for investors who have a long period and knowledge about stocks. In short, if you do not have 7 to 10 years, do not invest in stocks or equity mutual funds.

Two, you should always choose a mutual fund category that is in line with your risk profile. If you are a conservative investor, you should choose large cap mutual funds. Moderate investors should choose flexi cap funds and so on. Sector funds are not suitable for retail investors as they are extremely risky.

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