Each one has a different purpose / goal while investing, for some the purpose of investment is for Capital Appreciation / Asset Growth some might invest for Income Generation. If someone chooses wrong fund / avenue for their purpose the whole plan of investment gets spoiled. So, will brief what are the different purpose or goals and the respective scheme of investment. It’s better to allocate your capital based on your strategy or purpose of that investment.
Capital Appreciation / Asset Growth: if you are someone looking to build your capital or investment wealth, you will be better off to consider the following criteria of schemes-
- Diversified Equity Multicap funds
- Mid & Small cap funds
- International funds
- Thematic funds like Pharma, Banking & Financial Services etc
These investments are only for someone who can stay invested for 5 to 7 years plus and can take a reasonable amount of risk.
Income Generation: you have already created an investment corpus or you have got your Retirement Benefits and don’t have pension. If you are in this category you will be better off if you invest in the following schemes-
- Income / Bond Mutual Funds
- Banking & PSU debt funds
- Post office Savings or Senior Citizen saving schemes
- High quality Corporate Fixed deposits
Capital Preservation: you have created a corpus for a particular goal by using schemes of Capital Appreciation strategy and within few months to years you might have to use these funds, during such time it’s better to switch from Equities to schemes which has a large amount of capital preservation feature. What are these funds?
- Liquid / Overnight funds
- Short or Ultra Short term funds
- Short term Bank Fixed Deposits
- Arbitrage Funds
Please take cognizance of your investment horizon or when the exact requirement of this fund is and choose any of the above categories. You can also park in these categories of funds to hedge against market volatility.
Apart from the above generic purpose, there are also certain specific goals or purpose an individual can have. If you want to create corpus for your daughter marriage and want to accumulate gold, you can do that same by Investing in Gold funds or Gold ETFs. You want to hedge against healthcare inflation, you will be better off by investing in a Healthcare / Pharma thematic funds. Equities are also a best hedging tool against general or education inflation.
So you need to choose your investment scheme or asset class carefully based on your requirement or purpose or time horizon of your investments. If you goal is to capital preservation and if you invest in schemes of capital appreciation or income generation your financials will be in mess.
Happy Investing!
R♥Vi
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