Which One Should Be Your First Mutual Fund?

Which One Should Be Your First Mutual Fund?

• Experiences shape our lives
• That's why your first investment will play a critical role in your investing journey
• A bad experience can make you wary of equities
• It's imperative to choose your first fund wisely
• Here are four options best suited for first-time investors

How Will You Find Your Perfect Match?

• Here are some qualities that you should look for in your first fund:
  1. Simple to understand
  2.Must have a diversified portfolio to mitigate risk
  3.Should not be more volatile than broad indices like NIFTY 50
• Let's see which funds fit the bill

Option 1: ELSS Funds

• ELSS Funds allow you to save tax and build long-term wealth
• In a year, you can save up to 46,800 in taxes
• These schemes invest in companies of all sizes and across sectors
• So you get a diversified portfolio that reduces risk
• ELSS Funds comes with a 3-year lock-in period
• This benefits first-time investors, as it forces them to remain invested longer
• This can lead to earning better returns as they give time

Option 2: Large Cap Index Funds

• These funds invest in the top 100 companies in the same mix as the indices they track
• Examples include SENSEX, NIFTY 50, and
  NIFTY 100
• As you invest in established companies, the risk is lesser compared to mid and small-cap funds

Option 3: Dynamic Asset Allocation Funds

• These funds invest in both equity and debt
• And change the asset mix based on market conditions
• When markets look overvalued, they move from equity to debt
• Given their investment strategy, Dynamic Asset Allocation Funds typically fall less when markets correct
• And that can boost first-time investors' confidence

Option 4: Short-Duration Debt Funds

• These funds lend to the government and companies for 2-3 years
• So, investors looking to invest for this horizon can look at these funds
• These schemes are more tax-efficient than
  FDs if you invest for at least 3 years