Portfolio allocations for long term

#1

I am moderate risk taker and want to invest for long term. For creating the equity part of my portfolio which is about 70% I have decided to invest about 65% in large caps through index funds. How should I go about allocating the 35% of the portfolio through multicaps or through midcaps ?

#2

I don’t think you understand the meaning of moderate risk. You cannot be a 100% equity investor with a moderate risk appetite. That’s an oxymoron. Equities are risky - period!

If you aren’t able to stomach these drawdown, then, you aren’t a moderate investor

This is just Nifty 50 by the way, which is predominantly large-cap focused. Your mid-cap mutual funds stocks can drop even further and sharply.

This how the mid-cap index looks like and I hope you get the idea

In order to moderate your risk, you need to have an uncorrelated asset class in your portfolio. For example, bonds and equities tend have negative correlation. One tends to zig when the other zags. So, by having bonds in your portfolio, your portfolio tends to be less risky and stable. But you will sacrifice the returns potential of a 100% equity only portfolio.

This bonds allocation you can construct a portfolio yourself or simply choose a balanced funds.

All said and done best if you consult a registered financial advisor.

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#3

I am sorry for not being clear. This was only about the equity part of the portfolio. I have already invested in debt funds as 40% of my total portfolio.

#4

I think that question is a bit complicated as you are mixing risk taking with high risk investments. You are asking should you invest in high-risk equity funds as a moderate risk taker. I think that you should consider now some blue chip companies if you would like to invest further in equities

#5

Most of the investors are lacking financial awareness and as a result, during the market downturn, they just forget about their financial goal and the reasons for investing in mutual funds and simply keep on checking their fund values on a daily basis.

This leads to a fear of losing their capital and just start withdrawing their investments when they are in red.
But I just want to reiterate that this the stock market down side risk which mutual fund schemes have to go through over a period of time. Also, investors must keep in mind that they just invest in equity mutual fund portfolio with high risk and higher SIP returns. Then why to worry if you are a long term investor.
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