Ankush in a comment here asked
One thing I don’t find here (understand) is “how should I distribute money”.
Lets say for ex, I select 1 equity and 1 debt and 1 balanced fund and I am looking for higher returns then how should I invest?
Before I answer this question let me first drop a line about what is an Equity fund, Debt Fund and Balanced fund.
- Equity Funds:
- Equity funds invest a majority of their funds in equities (More than 80%) and a small portion in money market instruments. Such schemes have the potential to deliver superior returns, however, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short term.
- Debt Funds:
- Funds that invest in corporate debentures, bonds and in money market instruments. Although these funds are less volatile, they carry a credit risk. They are known as Liquid Funds / Liquid Plus funds.
- Balanced Funds:
- Balance funds invest in equity and debt instruments in varying proportions pre-defined by fund manager at the time of inception of the fund.
Now the question – what should be ideal investment and distribution of money. The answer lies in your risk profile. I have all my investment in only equity funds and at times I transfer everything into one single fund as well. I prefer dead money in my bank account than to put in the debt and liquid funds.
Ideally I recommend you to start the way I suggested here if you have a low risk profile but if you can risk a bit more it should be more equity investment.
I hope it helps but do remember that my advice will always be biased towards equity investment and you should take the final decision based on your risk profile.