New to mutual funds? Invest in these schemes to build wealth over a long period

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The markets may be troubling many mutual fund investors. However, that is not bothering new investors- we get several questions from these neophytes every day about how they should proceed and what schemes they should invest in. Here we will address these concerns of many new investors.

First, you should always remember that investing in equity mutual funds is only for your long-term goals. This is just to make sure that you do not chase returns and get into these schemes without a proper investment plan. Invest in equity mutual funds only if you have an investment horizon of at least seven years. In other words, you can’t wait for more than seven years, don’t invest in equity mutual funds. For short-term goals, always stick to bank deposits, company deposits, and debt mutual funds.

Next, we always tell our readers to choose their mutual funds based on their goals, investment horizons, and risk profile. Many investors say all that sounds extremely complicated and they just want some mutual funds they can start investing to make a corpus for their long-term needs. We normally ask investors to seek the help of a mutual fund advisor or financial planner for a personalised solution. This is because it is almost impossible to suggest any investment solution without a lot of details about the person, his or her financial details, goals, mental make up and so on. Yes, you may get product specific solutions from most online forums, but they may not suit you.

Is there a way out? Well, we believe most new investors can invest in a mutual fund scheme with a diversified portfolio. Diversified equity mutual fund schemes were a much preferred investment option two decades ago. In fact, most equity mutual fund schemes used to run a diversified portfolio irrespective of their names. Thanks to SEBI recategorisation of mutual funds, now schemes have strict investment universes. In such a scenario, you may stick to flexi cap schemes to take care of your long-term goals.

Flexi cap schemes have freedom to invest across market capitalisations and sectors/themes based on the view or market outlook of the fund managers. This means the fund managers may invest more in stable large cap companies in a volatile market. They may invest more in mid cap stocks in a bullish market to maximise returns. Similarly, they may invest more in IT or pharma stocks if the prospects are good. So, we believe that these schemes may be a good choice for investors who are looking for an easy or compromise solution to their long term investments.

Here are our recommendations: UTI Flexi Cap Fund, Parag Parikh Flexi Cap Fund, PGIM Flexi Cap Fund, Aditya Birla Flexi Cap Fund, Canara Robeco Flexi Cap Fund, and

Flexi Cap Fund.

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