Planning SIPs for a car or house in 10 years? Experts recommend diversified equity funds for long-term goals

Many first-time mutual fund investors often struggle with one key question — how should they start investing for multiple long-term goals like buying a car, purchasing a house, or building wealth while also managing market volatility? Financial experts believe the answer lies in maintaining a disciplined approach, staying diversified, and avoiding unnecessary risk-taking, especially for investors with limited market knowledge.

One such query came from Ritesh, a viewer of The Money Show, who wants to start SIP with Rs 20,000 monthly and for that he needs some mutual fund recommendation. He does not have any knowledge about mutual funds and he wants to have the strategy for his short-term goals and he wants to buy a car within 10 years and maybe a house also and he also wants to know if investing in gold ETF in the kind of situation that we are into will be a good call or not.

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According to Pankaj Mathpal, MD, Optima Money Managers, mutual funds can cater to investors across different time horizons, but the investment strategy should depend on the goal and duration.

According to him, equity mutual funds are generally better suited for long-term goals, while debt funds or conservative hybrid funds may work better for short-term requirements.

“Mutual funds are mainly meant for long-term investing, especially equity funds. For short-term goals, investors can consider debt funds or conservative hybrid funds,” Mathpal said.

In the case of an investor planning to invest Rs 20,000 monthly through SIPs with a 10-year investment horizon, Mathpal suggested that equity mutual funds can play an important role in wealth creation despite short-term volatility.

Based on the long-term horizon, he recommended funds such as ICICI Prudential Midcap Fund, Motilal Oswal Large and Midcap Fund, Bajaj Finserv Flexicap Fund, and HDFC Midcap Fund. “These kinds of diversified equity funds can be considered for a long-term portfolio,” he said.

However, Mathpal cautioned investors that equity investments can witness volatility in the short term, and investors should not panic during temporary market corrections.

On the question of investing in gold ETFs, Mathpal suggested avoiding fresh allocations for now. Referring to the government’s broader appeal to reduce gold imports, he noted that investments into gold ETFs eventually lead to additional physical gold purchases by fund houses.

“Considering the prime minister’s appeal as well as the current factors, my suggestion would be not to add gold ETFs right now,” he said.

The discussion also highlighted how many retail investors tend to take excessive risks during strong market phases, often investing aggressively in sectoral funds or direct stocks without fully understanding market cycles.

According to Mathpal, investors who entered markets between 2021 and 2024 experienced largely positive returns and may now wrongly assume that equity markets only move upward.

“Volatility is the basic nature of equity markets. Investors should understand that market corrections are normal in long-term investing,” he explained.

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He advised investors with limited market knowledge to avoid excessive exposure to thematic or sectoral funds, often referred to as satellite portfolios, unless they fully understand sector cycles and timing.

“Only a small portion of the portfolio should go into satellite or thematic strategies, and that too when investors understand when to enter and exit sectors,” Mathpal said.

He pointed out that many investors entered technology-focused funds at the wrong time and are now facing losses of nearly 20% in some cases.

For most retail investors, Mathpal recommended sticking to diversified mutual funds and multi-asset allocation funds where fund managers can actively manage asset allocation and market exposure.

“To manage risk better, investors should leave the strategy to professional fund managers and invest through diversified funds instead of taking concentrated bets on their own,” he added.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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