I want to invest around Rs 10 lakh in stocks and MFs for long term. I am new to equities, how to go about it?

I want to invest around Rs 10 lakh in stocks and mutual funds for the long term. Since
I am unfamiliar with the stock markets, please suggest which stocks and mutual funds should I invest in. 

Reply by: Raj Khosla Founder and MD – MyMoneyMantra.com

You are on the right track. Long-term investments in stocks and equity funds can be very rewarding. However, please note that investing in shares on your own may seem easy, but is fraught with risks. 

Individual stocks can be very volatile and if you do not have the time to research stocks or the knowledge to analyse their financials, you are better off investing in equities through mutual funds. Not only is your money managed by professionals but the risk is diversified across a basket of securities across several sectors.
Given that you have a long term investment horizon, you should distribute your money across 3-4 equity funds from different market segments. Nippon India Large Cap Fund and ICICI Prudential Bluechip Fund are good large cap funds you can consider. ICICI Prudential Large & Midcap Fund and HDFC Large & Midcap Funds are also worth considering. 

Among flexi-cap funds, you can go with Parag Parikh Flexi Cap fund or Franklin India Flexicap. For midcap exposure, consider Motilal Oswal Midcap Fund or Kotak Emerging Equity Fund. For small caps, invest in Axis Small Cap Fund or Nippon India Small Cap.

But one should also not invest a large sum in equity funds at one go. Instead, put the money in a short duration debt fund and start a systematic transfer plan into the equity scheme. For instance, if you have Rs 10 lakh to invest, identify 3-4 equity funds from different segments and put that amount in short-term debt schemes of the same fund houses. 

Then start systematic transfer plans that will shift Rs 20,000-25,000 into the equity schemes every month. Your money grows at 7-7.5% in the debt funds and slowly gets transferred into the equity funds over 24-30 months even as you benefit from the volatility in the equity markets.

(The views by experts are their own and not that of Business Today. Readers are encouraged to consult a qualified financial experts or a SEBI-registered investment advisor before making any investment decision)

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