Where should I invest for my child’s future for 10-12 years?

– Varun Verma

When making investment decisions, it is important to understand the risks, goals and horizons of the investment. Since the investment horizon is long (more than ten years) and it is for the future of the children, you may have an aggressive risk profile. You can plan to build an equity-oriented portfolio with a healthy mix of large and mid cap, flexi cap, mid cap and small cap category of funds as equities have the potential to deliver the best returns in the long run. , However, solution-oriented funds are available by various fund houses with a lock-in provision of 5 years. These funds have some exposure to fixed income securities, which can affect performance in the long run. Therefore, it is advisable to build a pure equity-oriented portfolio in open-ended schemes. You can look at splitting the investable amount/monthly SIP equally among HDFC Large & Mid Cap, Parag Parikh Flexi Cap, Kotak Emerging Equity Fund and Canara Robeco Small Cap Fund. This way your portfolio will be diversified across categories, geography and AMCs. However, if the investment is done through lump sum, then it should be through STP route in the suggested schemes in 10-12 months.

Last year has been great for NFOs and we have seen a lot of investment in it. Now, again a lot of NFOs are in line to be opened. Is it a good option to go for these NFOs or stick with existing funds for long term track record?

– Meaningful

NFO occurs when a fund house issues units for the first time or raises fresh funds for a new subject. It is a common misconception among investors that investing in NFOs will benefit them as they can buy each unit of the newly launched MF scheme at its face value. 10. In respect of Mutual Funds, the NAV is of academic interest only. What matters is the level of market at which you buy the mutual fund, especially if it is an equity mutual fund.

Buying MF when Nifty is trailing 15x P/E at NAV of Rs. 40 in the secondary market is a good idea. However, if Nifty is quoting at trailing P/E of 22, investing in mutual fund NFO with NAV of Rs 10 is a bad idea. Investing in any NFO can provide many benefits, which include portfolio diversification through investing in new strategies and flexibility, to name a few.

This can have many benefits if you have done your homework well and know the basic meaning of NFO and what benefits you can take from them. However, it is not suggested for the first time investor as it is important to consider various factors, such as the reputation of the AMC, track record of the fund manager, strength of the analyst team and knowledge of the market or economic cycle before investing. In these schemes (NFOs). Therefore, such investors should invest in schemes with a long track record.

Sanjeev Bajaj, Joint Chairman and MD, Bajaj Capital answered the questions.

(Please send your questions and thoughts to mintmoney@livemint.com)

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