A 24-year-old reader who wishes anonymity asks, “I am saving around 50k every month for long term (more than 10-15yrs). I equally invest 40k in (10k each) Parag Parikh flexi cap fund; Canara Robeco emerging equities; Union small cap fund; Axis midcap”.
“I invest in (5k each) IDFC 10 year gilt fund and HDFC developed world indexes. I also invest around 7.5k in Edelweiss balanced advantage fund for buying a car, say in 4-5 years. Could you please guide me if my mutual fund allocation is alright?”
When we responded to his email, he further added, “Apart from mutual funds, I also invest in Index ETFs(10k per month – Nifty and Nasdaq) for easy withdrawal and some amount in FDs(10k per month) and crypto(10k per month). I am very grateful and lucky to have a comfortable income. So currently, total savings is more than 60% of my total income”.
To save/invest 60% of total income is an excellent position to be in. However, your choices seem to be heavily determined by recent performance. I am afraid this is a case of shiny object syndrome resulting in 10% of this and 10% of that.
The first thing to do is stop adding any more volatile ingredients to your portfolio! It already has one thing too many! That 10% crypto exposure can swing from 2% to 25% in the overall portfolio. Are you willing to rebalance and pay the necessary tax? Or are you going to let the different components grow unchecked like wild bushes? Then there are regulatory issues around the corner.
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! 🔥
The next step would be to quickly build a rock-solid emergency fund (if you have not done this already). This can be accomplished via a simple bank FD (existing ones can be used) and a liquid fund. For recommendations, see Handpicked List of Mutual Funds Oct-Dec 2021 (PlumbLine).
Then we recommend building a strong fixed-income portfolio. There is no particular benefit in increasing equity exposure just because an investor is young. About 40% to 50% of the portfolio can be fixed income and provide stability to the overall portfolio.
Finally, as regards investment choices, we have the following recommendations:
- Stop investing in ETFs. As the investment value increases, your “easy withdrawal” requirement will change, especially when market turbulence increases. Also, it is entirely unnecessary to withdraw during market hours instantly – at least not when you are a long term investor.
- Parag Parikh flexi cap fund. Now, this has suddenly emerged as the darling of the young DIY investor in the last year or so – AUM of Parag Parikh Flexi Cap Fund grows by 147% in 2020! This can only mean one thing that the law of averages will strike soon, and performance will drop, or there will be better performers.
- Canara Robeco Emerging Equities Fund. We looked at its performance yesterday – Canara Robeco Emerging Equities Fund Performance Report. It has certainly done quite well.
- Union small cap fund – We do not recommend investing in small cap funds, at the very least not blindly via SIPs – Is it worth buying small cap mutual funds? And Why a SIP in Small Cap Mutual Funds is a waste of money and time.
The danger with choosing an active fund is that their performance will go through cycles and leave us frustrated for months to years. At 24, we recommend that you consider using index funds – a simple combination of NIfty and NIfty Next 50 is enough and focus on increasing your earning potential.
🔥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.
- 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
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)