Selecting the right mutual fund for a horizon of 7 years

1 min read 10 Aug 2022, 10:54 PM IST Harshad Chetanwala

There are multiple parameters for selecting the right mutual fund. One key parameter is the long-term performance of the fund and how it has fared during different market cycles

I want to invest ₹10,000 via systematic investment plan (SIP) in a flexi cap and a large cap fund. Which funds should I pick among Samco Flexi Cap Fund, WhiteOak Capital Flexi Cap Fund, Mirae Asset Large Cap Fund and Quant Large Cap Fund? I have an investment horizon of seven years and I want to increase my total SIP amount by 10 % per year.

—Ashish Kumar

Your decision to invest in large cap and flexi cap funds for a seven-year horizon is good. There are multiple parameters for selecting the right mutual fund. One key parameter is the long-term performance of the fund and how it has fared during different market cycles. This can help you understand how the fund may behave in the long-term during good and tough times.

Some of the funds mentioned in your query are recently launched, and have a limited track record. While these funds will be managed professionally by their respective asset management companies, or AMCs, you may want to wait for some more time before investing in them. This will help you know more about how the fund performs when compared with its peers. At this stage, you can consider funds with a sufficient track record.

The SIP of ₹10,000 can be split between UTI Nifty Index Fund, Mirae Asset Large Cap Fund, Parag Parikh Flexicap and Canara Robeco Emerging Equities. The Nifty Index Fund will help diversify into a passively managed fund and will also take care of investment in large cap. It is always better to increase the SIP amount regularly as this can help you build a larger corpus over the years and at the same time reduce the pressure on your finances at present.

Just to give visibility, an annual increase of 10% in the ₹10,000 SIP for the next seven years will help you build a corpus of approximately ₹15.65 lakh at a return of 10% per annum and ₹16.72 lakh at 12%. You may use the projected corpus to check if this meets your objective, or if you need to rework the SIP amount right from the beginning.

Harshad Chetanwala is co-founder at MyWealthGrowth.com.