Q: How do I invest 1 lakh for starting a portfolio for the long term and with an intention of wealth creation? I would like to start by saving 5,000 monthly. What are my investment options? I am a home maker and have a 16-year-old daughter.


A: You are a first-time investor but do want to invest for long term with the purpose of wealth creation. You can consider investing in mutual funds, where hybrid equity funds (balanced funds) and large-cap equity funds are a good starting point for you. Large-cap equity funds invest only in large-cap equity stocks and hybrid equity funds, as the name suggests, invest in both equity as well as debt asset classes, thereby reducing the inherent volatility attached to the equity asset class. At the same time, you should understand the risk and volatility attached with the equity category and be sure that the investments, if done in this asset class, are meant for the long term, which is seven to eight years.

The lump sum can be invested via STP (systematic transfer plan) wherein first the funds are invested in ultra short-term debt funds and from there, systematically switched to specified equity schemes. Likewise, the monthly amount can be invested, wherein the money is debited from the bank; this is called SIP (systematic investment plan). In both the cases, the debit is done on a fixed date for a fixed amount.

Surya Bhatia is managing partner of Asset Managers. Queries and views at mintmoney@livemint.com

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