I am 32-years old and planning my retirement and kids education expenses. I contribute Rs 10,000 monthly towards EPF. I am left with savings of Rs 10,000 each month which I want to invest. Since markets are at peak, should I wait until a drop? What are the best mutual funds to invest for long term? I am ready to take an above average risk and happy to invest 70-80 per cent in equity and rest in debt.
- Nagendra
For a person who is apprehensive about market peaks and wants to start investing in mutual funds, there can be no better option than balanced funds. It also suits your asset allocation requirement. These funds predominantly invest in equity (60-80 per cent) and rest in debt. The debt portion cushions the fall during the market turmoil. Apart from this, these funds do automatic rebalancing. They book gains from better performing asset class and lock-in profits into the other, that is from equity to debt or vice-versa. Plus they are tax-efficient due to the equity status they enjoy. If you invest in equity and debt funds separately and do the rebalancing yourself, you will have to pay tax on the debt portion and on equity before the completion of one year.
So, instead of worrying about the market levels start investing through systematic investment plan (SIPs) in balanced funds. By investing through SIP, you can take the benefit of rupee cost averaging. If the market goes down after you invest, you will be gathering more units at lesser price hence you will get to benefit when market goes up. Choose two to three balanced funds, start investing through SIP and stay put for long-term.
This article was originally published on May 02, 2013.
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