Choosing the Right Mutual Fund for a 7-Year Horizon

i want to invest 10,000 through a systematic investment plan (SIP) in a flexible fund and a large cap fund. Which funds should I choose among Samco Flexi Cap Fund, WhiteOak Capital Flexi Cap Fund, Mirae Asset Large Cap Fund and Quant Large Cap Fund? I have a seven-year investment horizon and want to increase my total SIP amount by 10% per year.

—Ashish Kumar

Your decision to invest in large cap and flexi cap funds over a seven-year horizon is a good one. There are several parameters for choosing the right mutual fund. A key metric is the fund’s long-term performance and how it changes over different market cycles. This can help you understand how the fund may perform over the long term during good and bad times.

Some of the funds mentioned in your query have been launched recently and have a limited track record. Although these funds are professionally managed by their respective asset management companies, or AMC, you may want to wait a little longer before investing in them. This will help you learn more about the performance of the fund compared to its peers. At this stage, you can consider funds with a sufficient track record.

The MS of 10,000 can be split between UTI Nifty Index Fund, Mirae Asset Large Cap Fund, Parag Parikh Flexicap and Canara Robeco Emerging Equities. The Nifty Index Fund will help diversify into a passively managed fund and will also support large cap investments. It is always better to increase the amount of SIP on a regular basis as it can help you build up a larger corpus over the years and at the same time reduce the pressure on your finances at present.

Just to give visibility, an annual increase of 10% of the 10,000 SIPs for the next seven years will help you build a corpus of approximately 15.65 lakh at 10% yield per annum and 16.72 lakh at 12%. You can use the projected corpus to check if it meets your goal, or if you need to rework the SIP amount from the start.

Harshad Chetanwala is co-founder of MyWealthGrowth.com.

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Dolores W. Simon