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I want to invest in lumpsum for five years

I have lumpsum amount, that I want to invest for minimum 5 years for sure, can you please suggest which Mutual Fund I need to chose, so that I will get maximum returns, those Mutual Funds can include sector Mutual Funds also?

Sep 24, 2015 by Ramesh, Karnataka  |   Mutual Fund

We do not give specific investment advice. Your investment decision should be based on your objectives, risk tolerance, current investment portfolio and other factors. You should consult with your financial advisor and invest accordingly. Over a 5 year investment horizon, small and mid cap equity funds can provide higher returns than other equity fund categories, but should note that small and midcap funds are more volatile and more susceptible to deeper corrections, compared to other fund categories. If you want to get high returns associated with mid cap funds and at the same balance your portfolio volatility, you can construct a portfolio of good large cap and midcap funds. The allocation to large cap and mid cap funds will depend on your risk tolerance and your current investment portfolio. For example, if you already have a portfolio of large cap funds you can allocate a greater portion of your lump sum investment to midcap funds and vice versa. You can also invest in diversified flexi cap funds. These funds invest in large cap, mid cap and small cap stocks. Over a investment horizon, it is always recommended that investors should choose consistent performers for their portfolio. You can read about consistent performers in various categories by going to the links below:-

Best mutual fund consistent performers in 2015: Large Cap Funds

Best Small and Midcap Mutual Funds: Consistent performers for investment in 2015

Best Diversified Equity Mutual Funds: Consistent Performers for investment in 2015

You should avoid sector funds, unless you are an expert investor with sufficient knowledge about the concerned sector. Unlike diversified equity mutual funds, sector funds are exposed to sector specific risks. It is important to time your entry and exit from sector funds. If you think that you have the necessary expertise you can invest in banking sector funds. There are two reasons why the banking sector funds may do well over the next few years. Firstly, the banking stocks have corrected sharply over the past one or two months. Secondly, the RBI is committed to reducing interest rates over the coming quarters and years. Thirdly, the government is taking a number of steps, including recapitalization of PSU banks, addressing NPA problems in certain sectors like power and steel and increasing the FDI limit in private sector banks. Therefore this sector is likely to outperform once credit cycle picks up in the economy. Having said that, it is important to reiterate that, unless you have the necessary investment expertise it is advisable to avoid sector funds and instead invest in diversified equity funds.

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