There are a host of mutual fund offerings that meet the needs of an individual at various stages in life. Take a look at how you can choose a mutual fund at different stages in your life.
If you are an unmarried individual who has just begun working and still in your twenties, straightway you should choose an equity related mutual fund.
The reason for choosing a equity mutual fund is simple - when you are young you have an appetite for risk and equity mutual funds are certainly very risky.
What this means is that you can superior returns with a little risk, which should make equity investments compelling in a young age.
There are a host of top performing equity mutual funds that you could choose from. Crisil for example has rated Birla Sun Life Top 100, Franklin India Opportunities Fund and SBI Blue Chip Fund as the number one in their categories.
You can choose from these funds or can also seek expert advise. Some of these have given a one year return of almost 70 per cent.
A married individual has many obligations. This includes a higher level of expenses especially during the initial phase. He can still consider a reasonably high amount of exposure to equity mutual funds, while keeping a low level of investments in debt equity mutual funds.
Ideally, he can look at an 80 per cent to 20 per cent ratio, between equity and debt oriented mutual funds. So, look for good quality equity and debt schemes where your money is safe.
Married individual with children
A married individual has far greater obligations then he has ever faced in his life. It is therefore best to start reducing exposure to equity and increase exposure to debt mutual funds.
You can consider a ratio of 70 per cent in debt and about 30 per cent in equity mutual funds. Do remember that if you feel you do not have too many obligations you could consider a slightly higher exposure to equity.
Equity mutual funds tend to give you slightly higher returns than fixed interest bearing instruments, though there is no guarantee of the same.
A few years before you retire it is best to move the entire money to debt schemes and liquid debt schemes. Some of the schemes give you regular dividend which should come handy in times of retirement. So, it would remain a good bet.
Mutual funds are an excellent way to build a long term corpus. Do not ignore them and start investing in them at an early age.