Last Updated on February 26, 2022 at 12:39 pm
Yesterday, we considered How to start investing in equity Today, let us discuss what should be the first mutual fund for a young earner or for new mutual fund investors. The financial services industry makes a big deal out of risk profiling. You cannot take theoretical answers about market volatility and provide investment advice on that! The true risk appetite of a person is revealed only when the market crashes.
This is the reason why asset allocation is so crucial. So if you have not read the previous post on how to gradually increase equity asset allocation, please do so first and then head back here.
The idea is to:
First, define a financial goal. Example: How to buy an Audi Car
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Second, determine a suitable asset allocation for that goal using the robo advisory template
Third, plan to reach the desired asset allocation gradually. For example from 0% equity to 60% equity in 2-3 years.
Fourth (only fourth), consider how to invest in equity. If you wish to use equity mutual funds, then let us consider the options.
![First mutual fund, testing the water](https://freefincal.com/wp-content/uploads/2018/02/Testing-the-water-FB.jpg)
Before we proceed, two observations.
1: Some people recommend an equity-oriented balanced as a “first fund”. Nothing wrong with this provided it is treated as pure equity and the exposure to it is gradually increased. Please recognise that the reduction in risk from 95% equity to 70% equity is quite marginal. See Balanced Equity Funds: the low risk, high reward option.
However, choosing a balanced fund can be tough for new investors and they are likely to be misled by star ratings.
2: Some advisors start clients on a liquid fund or arbitrage fund and then gradually include equity funds. Not a bad idea, assuming other aspects of the plan are done right.
So let us get to the options.
A: “I need a fund without much maintenance” A simple Nifty or Sensex fund will suffice.
B: “I want a fund that takes risks, but has good risk management and good returns”. Try Parag Parikh Flexicap Fund. However, there is no guarantee its performance will sustain in future. Using index funds gets rid of this worry.
Suggestions:
1: There is no need for ELSS mutual funds. I would avoid them, especially as your first fund.
2: When people claim there is a “bull run”, euphoria, “markets are at a peak”, then it is a great time to start investing. Any time is good, but when the market is “high” then you can expect some downward or sideways movement soon and it better to begin your equity journey on a dull note. It will serve as a good reminder that the next “crash” is just around the corner. Personally, I had to wait for 5Y for a positive return in my retirement portfolio: The rise and fall of my retirement corpus (not the date of publication of this post)
3: Expect less and you won’t be disappointed!
Live long and prosper!
Re-Assemble: money management basics for young earners
Re-assemble is a series focussing on the basics of money management for young earners.
Step 1: Listing your goals dreams and nightmares
Step 2: Lay the Foundations to Get Rich creating an emergency fund
Step 3: How to buy Term Life Insurance
Step 4: How to choose a suitable health insurance policy
* Apollo Munich Optima Restore Benefit vs Max Bupa Re-fill Benefit
* Star Health Comprehensive Insurance vs Religare Care Comprehensive Insurance
* Building a health insurance comparison chart + Cigna TTK vs Royal Sundaram Health Policies
* How to buy a Super Top-up Health Insurance policy
* How I selected a health insurance policy
* Why we all need a corpus for medical expenses and how to build it
Step 5: How to select a credit card for maximum benefit
Step 6: How to track monthly expenses and manage them efficiently
Step 7: How to close your loans and live debt-free
Step 8: How to buy a personal accident insurance policy
Step 9: Are you ready to let go and let your money grow?
Step 10: Investment planning case study 1: How to create an investment plan
Step 11: Case study 2: Retirement planning for 27-year old Amar
Step 12: Three Key Factors that decide how we achieve our financial goals
Step 13: How to start investing in equity?
Step 14: What should be my first mutual fund? (this post)
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => 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.
![Follow Freefincal on Google News Follow Freefincal on Google News](https://freefincal.com/wp-content/uploads/2023/07/Follow-Freefincal-on-Google-News.jpg)
![Subscribe to the freefincal Youtube Channel Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.](https://freefincal.com/wp-content/uploads/2023/07/Subscribe-to-the-freefincal-Youtube-Channel.jpg)
![Follow freefincal on WhatsApp Channel Follow freefincal on WhatsApp Channel](https://freefincal.com/wp-content/uploads/2023/09/Follow-freefincal-on-WhatsApp-Channel-300x83.jpg)
![Listen to the Lets Get Rich with Pattu Podcast Listen to the Lets Get Rich with Pattu Podcast](https://freefincal.com/wp-content/uploads/2023/07/Listen-to-the-Lets-Get-Rich-with-Pattu-Podcast.jpg)
![Lets Get RICH With PATTU podcast on YouTube Lets Get RICH With PATTU podcast on YouTube](https://freefincal.com/wp-content/uploads/2023/08/Lets-Get-RICH-With-PATTU-podcast-on-YouTube-644x362.jpg)
- 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 over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
![Pattabiraman editor freefincal](https://freefincal.com/wp-content/uploads/2019/11/Pattabiraman-author-freefincal-article-bottom.jpg)
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!
![Both boy and girl version covers of Chinchu gets a superpower](https://freefincal.com/wp-content/uploads/2021/02/Article-bottom-Chinchu-gets-a-superpower-front-cover-for-girls-and-boys.jpg)
![Feedback from a young reader after reading Chinchu gets a Superpower (small version)](https://freefincal.com/wp-content/uploads/2021/02/For-bottom-Feedback-from-a-young-reader-after-reading-Chinchu-gets-a-superpower.jpg)
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
![You can be rich too with goal based investing](https://freefincal.com/wp-content/uploads/2016/11/You-can-be-rich-243x300.jpg)
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
![Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want](https://freefincal.com/wp-content/uploads/2017/05/2-mini-Cover-pink.jpg)
Your Ultimate Guide to Travel
![Travel-Training-Kit-Cover-new](https://freefincal.com/wp-content/uploads/2019/11/Travel-Training-Kit-Cover-new.jpg)