When it comes to building a long-term investment portfolio, mutual funds stand out as an attractive option for wealth creation. With assets under management soaring to a monumental Rs 48 lakh-crore corpus, it’s evident that investors place significant confidence in this investment tool. However, navigating through the myriad of mutual fund categories can be a daunting task. Let’s break down some of the key categories to help you make informed investment decisions:
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Large and Mid-Cap Equity Mutual Funds:
Ideal for investors seeking sustainable growth with moderate risk. Invests in both large-cap (ranked 1-100th) and mid-cap (ranked 101-250th) companies. SEBI norms mandate a minimum of 35% investment in each category. Suited for long-term financial goals like home buying or education planning. Past five-year returns range from 18% to 20%.
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Mid-Cap Mutual Funds:
Involves higher risk due to investment in mid-sized companies. Investment horizon typically over seven years with a high-risk tolerance. Requires patience during economic downturns. Past five-year returns range from 22% to 24%.
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Flexi-Cap Mutual Funds:
Offers dynamic equity allocation across all market caps. Provides flexibility for portfolio adjustments based on market dynamics. Suited for moderately conservative investors with an investment horizon of over seven years. Past five-year returns range from 20% to 25%.
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Balanced Advantage Funds:
Invests in a mix of stocks and debt instruments. Allocation between asset classes adjusts based on market conditions. Offers a balance between growth and stability. Suitable for moderate-risk investors with an investment horizon of more than five years. Past five-year returns range around 16% to 17%.
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Equity-Linked Savings Schemes (ELSS):
Invests in stocks across all market caps, qualifying for tax benefits under Section 80C. Least lock-in period of three years, making it ideal for tax-saving purposes. Offers dual benefits of tax savings and growth.
Past five-year returns range from 17% to 23%.
From large- and mid-cap blends to flexi-cap flexibility and tax-efficient ELSS options, mutual fund categories provide a plethora of investment opportunities for long-term wealth creation. Diversification across these categories can help build a robust portfolio with market-beating returns and effective risk management.
However, in case of any doubts or uncertainties, seeking guidance from a professional financial expert is always advisable. With strategic planning and informed decisions, you can embark on a journey towards financial prosperity and security.
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