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Best Mutual Fund Scheme to Invest Rs.2,000 per month for the Next 20 Years

Updated on :  

08 min read.

No matter which industry expert you may consult, it is not feasible to figure out the mutual fund scheme to perform to its full potential for 20 years straight. The performance of mutual fund schemes may vary based on how the fund is managed and many other factors.

In contrast, what best you can do is distribute your funds in 2 or 3 mutual fund schemes. Also, make sure to keep an eye on their performance and rebalance your portfolio as required.

Apart from this, you may want to understand the factors you need to consider to find the best mutual fund scheme. Here is a little help for the same.

Selecting the Investment Category

If you want to stay invested for a long time, equity funds are a good option. This is because you don’t have to worry about short-term volatility in the market. 

Equity funds can be divided into four categories – large-cap, mid-cap, small-cap, and multi-cap funds. These funds invest in companies according to the market size. There are other categories of equity funds that invest in specific sectors.

Large-cap funds are considered relatively less risky and stable from the risk perspective than mid-cap and small-cap funds. Choose the fund based on your risk appetite.

In case you are fine with a relatively short-term investment, you can go for debt funds.

Selecting the Right Fund

Once you select the category, it is time for you to choose the right fund for you. Here are the factors you need to consider before deciding on a fund scheme.

  • Make sure that the returns of the fund have been significantly higher than the category benchmark.
  • The fund you choose must have enough history so you can evaluate the performance of the fund.
  • The assets under management for the fund scheme must not be too low or too high.
  • The expense ratio should not be very high.
  • It is good to have a fund that has constantly outworked the benchmark in the recent past.
  • For equity funds, the Sharpe ratio must be significantly higher than the benchmark.
  • For debt funds, the debt rating should be a minimum of AA.

Once you invest in mutual funds, review the fund performance at least once every year, so you know if there is a need to sell off the fund if it falls out of your criteria and buy another one.

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