Investors should explore portfolios tailored to their goals when considering investments in small and mid-cap companies, according to Kshitiz Mahajan, managing partner and chief executive officer of Complete Circle Wealth Solutions LLP.
He lists some important points that investors should remember before investing in small-cap funds:
Allocate to goals that are maturing after 10 years.
Any further allocation should be done over next 3-6 months.
Allocate in a staggered manner via STP.
Continue through SIP.
Book profit, if any, if your goals are maturing anytime soon.
"Look at flexi-cap, multi-cap or focus fund," he advised on future allocation to equities.
Build asset allocation based on one's goals and targets, as one generic view will not be suitable for all investors, according to Kalpen Parekh, managing director and chief executive officer, DSP Mutual Fund. "Overweight small-cap should do profit-booking if they need money," he said.
Query 1: I wish to invest Rs 1 lakh per month through SIP in mutual funds, which will yield good returns. Can you suggest some funds to achieve my goals?
Name: Dr Dibya Prakash Bathwal I Age: 62 years.
Kalpen Parekh: Ideally, a flexi-cap fund or balanced (advantage) fund, as having some cushion of fixed income in a portfolio is tax-efficient and volatility-efficient.
Kshitiz Mahajan: You should allocate 20% to Nifty 50 and the rest in balanced advantage fund or flexi-cap fund.
Query 2: We recently celebrated our son's first birthday and received a gift amount of Rs 10 lakh. We want to invest the money in mutual funds and use it for his education and marriage. Is it a good idea to invest Rs 10 lakh in a small-cap fund? Or should I diversify between mid, small and large-cap funds?
Name: Arjun I Age: 33 years.
Kshitiz Mahajan: You should invest in STP. You can also invest the lump sum in flexi-cap and focused category. But, my suggestion is to do a systematic transfer plan instead of investing it in one go.
Watch the full conversation here:
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