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Mutual Funds - Where should young investors invest in 2021?

11 Feb 2021

While one of the factors that motivates new investors is tax saving, investing to fulfill life goals would require investments beyond the fixed-income tax-saving instruments.

For youngsters, who have just started their earnings, investments generally take a backseat as they prefer to spend more on enjoyment. For those who want to start investing, where to invest is always a dilemma.

While one of the factors that motivates new investors is tax saving, investing to fulfill life goals would require investments beyond the fixed-income tax-saving instruments.

Equity

As new investors have a long working life to invest, equity is an ideal option for them to generate higher returns in the long term. Moreover, post-lockdown the revival of economic activities has resulted in a market rally that pushed the Sensex above 50,000 level.

New investors should consider being overweight on equities as an asset class. Currently, we are in an economic recovery and earnings upgrade cycle, which is finding strong policy support and in such an environment, equities tend to outperform other asset classes. We would suggest 60 per cent allocation to Large-cap and 40 per cent to Small- and Mid-cap. We believe there are still some value plays to be found in the Small- and Mid-cap space even though the market has rallied.

Debt

Apart from equity, it is also essential to allocate some assets in debt to take advantage of market fluctuations and maximise return in the long term.

If a new investor wants to invest in debt we would recommend taking exposure in MFs and papers in 5-7 years maturity segment or invest in AA or A (strong balance sheet) papers up to 35 per cent of the portfolio. Avoid short term papers from a medium-term investment perspective.

Portfolio rebalancing

After allocating assets in debt and equity in a fixed proportion, it is also necessary to review the portfolio periodically and rebalance the portfolio to restore the debt-equity ratio once it gets skewed.

Source: Financial Express BACK

To be added soon

Priyanshu B. Tanna

SEBI registered IFA

ARN119467 & EUIN E-183966

To be added soon

Bharat Tanna

SEBI registered IFA

ARN26176 & EUIN E-044509

To be added soon

Kundan B. Tanna

SEBI registered IFA

ARN294073 & EUIN E-553599

Risk factor

Risk Factors – Investments in Mutual Funds are subject to Market Risks. Read all scheme related documents carefully before investing. Mutual Fund Schemes do not assure or guarantee any returns. Past performances of any Mutual Fund Scheme may or may not be sustained in future. There is no guarantee that the investment objective of any suggested scheme shall be achieved. All existing and prospective investors are advised to check and evaluate the Exit loads and other cost structure (TER) applicable at the time of making the investment before finalizing on any investment decision for Mutual Funds schemes. We deal in Regular Plans only for Mutual Fund Schemes and earn a Trailing Commission on client investments. Disclosure For Commission earnings is made to clients at the time of investments. Option of Direct Plan for every Mutual Fund Scheme is available to investors offering advantage of lower expense ratio. We are not entitled to earn any commission on Direct plans. Hence we do not deal in Direct Plans.

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