In your 20s? Here's where you can invest to maximise your returns

What kind of investments would you suggest for someone in their 20s? - Anonymous

If you are in your 20s, don't require the money immediately and are aiming for long-term wealth creation, consider starting with a small-cap fund. Small-cap funds are known to deliver impressive returns in the long term. But keep in mind that they carry significant risks. During periods of market downturn, like the 2008 Global Financial Crisis, some of these funds lost over 50 per cent of their value. Thus, invest in small-cap funds only if you have a high-risk appetite and a longer-term horizon of at least seven years.

That said, a more systematic approach would be to start by investing in ELSS funds (also known as tax-saving funds), even if you are under the new tax regime. Although these funds come with a three-year lock-in period, this feature can help you get disciplined with your investing and accustomed to the short-term fluctuations associated with equity.

These funds are even more beneficial if you are under the old tax regime, as they can also help you save tax under Section 80C of the Income Tax Act.

Aggressive hybrid funds are another option, especially if you get easily anxious with the market's ups and downs. These funds invest in equity and debt instruments, with a higher allocation to equities. Further, they offer a balance of growth and safety, as the debt component helps cushion the impact of market downturns.

Last but not least, if you have any savings left, or if your goal isn't to save taxes and fine with market's short term fluctuations, consider investing in a flexi-cap fund. They are diversified funds, meaning they invest across several sectors of the economy.

Also read: How to start mutual fund journey in your 30s