BackHow can I invest my income to build long-term wealth?
Mutual funds are the best way to invest as they are managed by professional fund managers
PremiumI am a 24-year-old government bank employee drawing a monthly salary of ₹50,000. I want to invest 20% of my salary in the markets. I want to know how to go about with long-term wealth creation.
— Shuvham Ghai
You can focus on long-term wealth creation but having clarity on your near-term goals will help you plan in a better manner.
You may consider investing with the help of mutual funds and as you gain more experience, you may think of investing in stocks if required.
Mutual funds are the best way to invest as they are managed by professional fund managers. Over a period, having 6-8 equity funds in your portfolio for all long-term goals is good enough.
You can start with 2–3 funds at present. Avoid investing in mid-cap, small-cap, and sectoral funds or doing random investments at this stage. Try to build a portfolio that is predominantly large-cap-oriented. You can create a blend of the index fund, large-cap, and flexi-cap funds at present. Over time, you should plan to increase the monthly investment as you grow further in confidence and career.
Harshad Chetanwala, co-Founder at MyWealthGrowth, replied to this query.
My spouse and I are in our 30s and invest ₹60,000 per month via SIPs— ₹20,000 in HDFC Sensex plan, ₹10,000 in ICICI Balanced fund, ₹7,500 in HDFC mid-cap opportunity, ₹7,500 in HDFC small-cap fund, ₹7,500 in DSP mid-cap fund and ₹7,500 in DSP small-cap fund. Our risk appetite is high for the next 10-12 years, and we need to know what changes could be made to our allocations.
— Name withheld on request
I would suggest that when you have about five years left in your investment horizon, you should start making some debt allocation in your portfolio and start building it up with the profits from your overall equity portfolio. That would make sure that you are not completely exposed to market vagaries at a time when you need the money.
When it comes to small and mid-cap funds especially, it would be good to diversify more to take advantage of multiple strategies. You may want to add or replace a small and mid-cap fund from your portfolio with similar funds from Axis (mid-cap) and SBI (small-cap) fund houses.
Srikanth Meenakshi, co-founder, PrimeInvestor.in., replied to this query.
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