A reader asks, “Can I exploit only one mutual fund for all my monetary targets like retirement, youngster’s schooling, and so forth.? Or ought to I purchase separate mutual funds for every objective?” We assume the “one mutual fund” refers to an fairness fund.
The brief reply is you are able to do each. I choose separate mutual funds for every objective. For particulars, see Portfolio Audit 2023: The annual evaluate of my goal-based investments. I additionally know a number of buyers and advisors preferring simply 1-3 mutual funds for all monetary targets. This is called the unified portfolio, which we’ve got mentioned earlier than.
The freefincal robo-advisory monetary planning instrument supplies each the unified portfolio technique and unbiased portfolios for every monetary objective. That is an illustration from the instrument.
The black arrows symbolize funding portfolios. The purple arrows symbolize systematic withdrawals earlier than every objective within the unified portfolio.
Issues to contemplate when utilizing the unified portfolio
- You need to use a single fairness index fund (Nifty/Sensex) for the portfolio’s fairness element. You need to use EPF (for retirement), PPF, mounted deposits or debt mutual funds. See: Which debt mutual fund ought to I exploit for long-term monetary targets?
- For those who choose, you should utilize 1-3 fairness mutual funds. Some buyers like to mix index funds with lively funds. That is completely wonderful so long as the objective planning is strong. See: The lively vs passive debate isn’t essential in portfolio administration.
- By no means mix short-term and long-term targets in a unified portfolio. They’ve totally different danger profiles. Ideally, all targets within the unified portfolio ought to be at the least ten years outdated.
- Have a risk-management technique in place earlier than you begin investing. A number of years earlier than the objective deadline, it’s higher to withdraw from the unified portfolio and maintain apart the corpus wanted for that objective. That is illustrated above and integrated into the freefincal robo advisor instrument.
- Ideally, the final objective ought to be retirement.
Whether or not it’s an unbiased portfolio or a unified portfolio, neither technique is superior. It’s only a matter of which is extra suited to our temperament. So as a substitute of asking others which is “higher”, we must always ask ourselves which might assist us sleep higher.
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Dr M. Pattabiraman(PhD) is the founder, managing editor and first writer of freefincal. He’s an affiliate professor on the Indian Institute of Know-how, Madras. He has over ten years of expertise publishing information evaluation, analysis and monetary product growth. Join with him by way of Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You may be wealthy too with goal-based investing (CNBC TV18) for DIY buyers. (2) Gamechanger for younger earners. (3) Chinchu Will get a Superpower! for teenagers. He has additionally written seven different free e-books on numerous cash administration matters. He’s a patron and co-founder of “Payment-only India,” an organisation selling unbiased, commission-free funding recommendation.
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