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Volatility in equity portfolio will even out in the long run

The number of funds in your portfolio will depend on the amount of monthly investment you plan to make

How many funds and what kind should I invest in for my retirement which is 20 years away?


When you are investing for your retirement that is 20 years away, choosing a diversified, all-equity portfolio is the right thing to do. You should invest systematically, say on a monthly basis. As you keep investing, the value of the portfolio will fluctuate up and down along with the market and economic conditions, but such movements should not faze you. Over the long run, these movements will even out.

The number of funds in your portfolio will depend on the amount of monthly investment you plan to make. Roughly speaking, if you are investing less than 2,000, you should choose just one fund. For every additional 2,000, you can add a fund, up to a maximum of 5-6 funds.

Regarding the types of fund, that in turn would depend on the number of funds you have in your portfolio. If you were going to go with just one fund, going with a broadly diversified fund such as HDFC Equity would be good. As you increase the number of funds, you can choose to add funds from the large-cap, large- and-mid-cap, and small- and mid-cap categories (in that order) to fill out your portfolio. Please choose from the Mint50 funds, Mint’s curated list funds, and review your portfolio once a year.

I’m 25 years old and want to make mutual fund investments. I have no investments and can invest 10,000 per month. I’m also looking to save some tax.

—Mahesh Gopalan

The recent budget has increased the tax deduction limit available to individuals under section 80C by 50,000. This means investors can save up to 15,000 more in terms of their tax outflow by investing in various financial instruments, including tax-saving funds.

In your case, you first need to figure out your total tax liability and calculate how much you need to invest in tax-saving mutual funds to save the maximum you can on taxes. Depending on what that amount is, you should first take care of that with your monthly investment. For example, if you need to invest 50,000 in tax-saving funds, you can complete your investments in the next five months. The reason to get this done early is because tax-saving investments are subject to a three-year lock-in period, and the earlier you invest in it, the sooner they’ll be out of the lock-in period. You choose from any of these: Axis Long-term Equity Fund, Quantum Tax-saving Fund and Religare Invesco Tax Plan.

Once you have taken care of your tax-saving investments, you can start to create a real investment portfolio for your long-term goals and aspirations. For that, you can turn to diversified mutual funds such as HDFC Top 200, UTI Equity, and Mirae Asset India Opportunities Fund.

Queries and views at mintmoney@livemint.com

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