How to select schemes if one is new to Mutual Funds

For an individual who has no idea about mutual fund investing, he should first assess how much risk he can take and what is the investment horizon of his SIP or the financial goal which he wants to achieve through the SIP.

For example – If your risk profile is low and investment horizon is 1-2 years you can invest in short term bond funds or liquid funds. But if your investment horizon is 3 years you can invest in ling term bond funds/ income funds.

However if your risk profile is moderate and invest horizon 3 years, you can still invest in income funds but if the investment horizon is 5 years or so then you can invest in balanced funds. Similarly, if you can take even higher risk and the investment horizon remaining the same, you can invest in large cap funds or diversified equity funds. For the highest risk takers, mid & small cap funds could be the best choice for the long term.

Once you are sure about the above that you should select an appropriate fund to start your SIP.

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