We typically ask our readers to invest in equity mutual funds only if they have an investment horizon of at least seven years. The market is hovering around its all-time high and there are many uncertainties in the horizon. In such a scenario, it is always better to give your investments more time.
It is better to take an online quiz to find out your risk appetite. Most investors claim they have higher risk when the market is doing well. They realize they don’t have the risk tolerance when the market tanks heavily. So it is always better to invest with realistic expectations.
We also believe it is always better to have a focused portfolio when you are investing a modest amount of money. Investing in many schemes in several categories often results in over diversification and drag down the overall returns. Try to build a core portfolio based on your risk appetite. For example, a moderate investor with an investment horizon of seven years can invest in one or two flexi caps funds. If she wants to reduce the risk, she can add a large cap fund.
If you are not clear about investing in mutual funds to meet your various goals, seek the help of a mutual fund investor or financial planner. Do not expose your investments to unwanted risk.