A reader says, ” I am a long-time admirer and follower of your blog. I started investing in 2010 after getting a job and am continuing. I am 37 years old, and my portfolio allocation is 72% equity (80% direct equity and 20% MF) and 28% fixed income”.
“I wanted to invest for my newborn daughter for her education and marriage. Can you please suggest a single MF where I can invest peacefully without closely looking at performance? After reading your articles, I initially thought of a Nifty 50 index fund, but I am also considering Low Volatility Index Fund and a Midcap 150 Quality 30 Index fund”.
It should be evident that the ideal choice is a Nifty 50 index fund. The other factor-based funds, like low volatility or quality, can exhibit cyclic behaviour compared to Nifty 50 or their parent indices. That is, sometimes they would underperform (for example, the quality midcap index has underperformed the Midcap 150 over the last year or so) and sometimes overperform.
Then again, the same logic applies to Nifty 50 too! Sometimes it would be easy to find funds that outperform the Nifty 50, and sometimes not. So the performance of any fund will always be cyclic to something else.
So then, how do we invest in peace?
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
- Shift focus from returns or performance to goals.
- Focus on the target corpus and the asset allocation required.
- Focus on how you intend to vary this asset allocation, that is, reduce equity exposure to manage the sequence of returns risk.
- Focus on how you will keep up with a fixed investment schedule and increase the amount invested each year.
If you can check the above points, where you invest – active fund, passive fund, or factor fund – is a tertiary consideration.
My portfolio has only active funds, most of which are old holdings held for at least seven years or more. Portfolio details here: Fourteen Years of Mutual Fund Investing: My Journey and lessons learned. I have continued to invest through ups and downs in performance because of the above goal-based approach.
So yes, you can invest in a Nifty 50 index fund, but appreciate that it would go through relative performance peaks and troughs. However, what is more, important is the planning for the goal.
- What are the current costs of college and higher education?
- What is a realistic inflation rate? At least 10%, but the higher, the better!
- What asset allocation am I going to choose? Please do not use 100% equity just because there is a lot of time left!
- How am I going to reduce portfolio risk over the years?
- How much should I invest, considering all of the above, and how will I increase the investment amount?
This guide will be of further assistance: As new parents, how should we start investing for our child’s future expenses?
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)