Five Mutual Fund Categories To Consider For Short-Term Investments

Given the volatility in equity markets, it is better to invest in debt funds for short-term goals, which essentially means bonds, according to Mrin Agarwal, financial educator and founder, Finsafe India Pvt.

Query 1: 60% portfolio exposure in PPFAS and rest in direct large-cap. Looking to add one or two more funds. What should be my approach as a long-term investor?

Current Investments: Parag Parikh Flexi Cap (Rs 23.72 lakh) and Parag Parikh Tax Saver (Rs 5 lakh).

Name: Ram I Age: 33 years

Mrin Agarwal: Both the stocks are from the same fund house and they have a 65% overlap in stocks held in both the schemes, which is very high. It is very important for you to diversify in mid-cap and small-cap funds like Mirae Midcap and Nippon Small Cap.

Vishal Dhawan: I would suggest the combination of adding some indexes and the exposure to international funds. I would recommend S&P 500 Index fund.

Query 2: I want to invest Rs 2 crore for over 2 years from my retirement fund and eventually start a Systematic Withdrawal Plan of Rs 1.2 lakh. Can you recommend a few funds?

Name: Manoj Gupta I Age: 61 years

Vishal Dhawan: It is important to divide funds into buckets. A fund in a short-term debt fund and a Balanced Advantage Fund can be an option. I would recommend ABSL Short Term debt fund; in the Balanced Advantage side, you can look at HDFC or ICICI funds. You can also invest in UTI and Parag Parikh Fund under index fund category.

Mrin Agarwal: If you are not willing to take risk, then you have to do the bucket strategy where whatever you need in next three years will be in ultra-short term and the balance can be in short term. I would suggest ICICI and HDFC Balanced Advantage Funds as my top picks for him.