Discover the top investment options for Rs 20 lakh with a five to 10 year horizon
27-Feb-2023 •Chirag Madia
I want to invest Rs 20 lakh for five to 10 years. Please advise which and where to invest. - Anonymous
The answer is simple. Mutual funds.
For retail investors seeking to accumulate wealth, mutual funds are one of the most accessible options available. Given your investment horizon, equity mutual funds could be a good option as they can provide inflation-beating returns over the long term. Participating in equities through mutual funds is an easy way for retail investors to invest in stocks.
Now which mutual funds to invest in?
For first-time investors, it's recommended to start with aggressive hybrid funds. These funds invest 70 per cent of their assets in equities and 30 per cent in debt, providing investors with equity exposure to earn higher returns, while the debt allocation helps protect against downside volatility.
Although aggressive hybrid funds may also experience uncertainty during market downturns, they are likely to fall less than pure equity funds.
Experienced investors may consider investing in flexi-cap funds.
Now you know the funds, should you invest the entire Rs 20 lakh at once?
It's not advisable to invest the entire Rs 20 lakh in equity funds at once, as equities are volatile in the short term. If the entire amount is invested at once, and the market corrects soon after, there can be a significant reduction in the value of your investment. Instead, it's better to spread out the investments over a period of time to average the cost of purchase and reduce the risk of entering the market at an inopportune time. As a general rule, investors should spread out their investments over half the time it took to earn the money, but not more than three years. It's recommended to spread out the investments over a period of 12-18 months.
If you're unsure which mutual funds to invest in, you may want to consider our analysts' picks list, which features both flexi-cap and aggressive hybrid funds. By investing prudently, you can achieve your financial goals and secure your future.
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