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Does Asset Allocation have any meaning if I plan doing SIPs for long term of 20 years

I have a plan to invest in MF SIP for wealth creation for very long term like 20 years. Then I think there is no meaning of Asset allocation and I can invest safely in mid and small cap and 10% in large Caps MF SIP. Am I right? How many funds should I keep in my portfolio?

Jul 4, 2016 by Bharat, Ranchi  |   Mutual Fund

It is indeed a very good thought to invest in MF SIP for long term wealth creation. If your long term horizon is as long as 20 years, then of course you can invest in mid and small cap funds. As far as large cap funds are concerned, they are ideal even for an investment horizon of 5 - 7 years.

Investing for long term for wealth creation is a financial goal and asset allocation is very important in that context. For example, today your risk taking appetite might be high, but as you progress with your investments, say 5-10-15 and 20 years your asset allocation keeps changing. Therefore, the more you progress towards the long term wealth creation through equities your equity allocation should ideally get lower. Therefore, you might like to rebalance the same by investing a portion of your other investible surpluses into debt while continuing the SIPs as planned.

The idea is to keep rebalancing the overall asset allocation with change in your risk taking appetite.

The number of funds will depend on the total monthly SIP that you are planning. However more than the number of funds, the selection of good funds is vital.

Do write to us how much you want to invest every month?

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