Planning to invest in equity mutual funds from this Diwali? Here is how to do it the right way

With Diwali a time for new beginnings and investments, many investors consider equity mutual funds as a viable option for investment and to grow their wealth. A solid strategy begins with setting the right asset mix and market mix and a balanced allocation can be achieved by investing across diversified mutual fund categories.

“Diwali is an ideal time to start investing, and a solid strategy begins with setting the right asset mix and market mix. A balanced allocation across large-cap, mid-cap, and small-cap funds—with 55% allocated to large caps and the rest to mid and small caps—can be achieved by investing across diversified mutual fund categories,” said Amitabh Lara, Executive Director & Unit Head - Mumbai, Anand Rathi Wealth.

“This approach not only taps into the growth potential of different market segments but also aligns your portfolio with funds that have consistently generated alpha across various market cycles. By adopting this diversified strategy, you're positioning yourself for stronger, long-term performance,” he added.


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With sectoral and thematic mutual funds continuously receiving inflows of around Rs 96,489 crore in FY25 and Rs 1.20 lakh crore in 2024 so far have remained the investors' favourite category.

These schemes have offered upto 60.97% return in FY25 with an average return of 12.76%. In 2024 so far, sectoral and thematic funds have offered up to 43.14% return and an average return of 20.48%.

While planning to start investing in equity mutual funds, should investors invest in sectoral and thematic funds? What allocation should be made?

The expert recommends investors to remain cautious while making investments in these funds as overinvesting in these categories can expose the portfolio to unnecessary risk particularly in the wrong cycle. Thus investors who are not adept with market knowledge should avoid this category as tactical movements will be required.


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“When it comes to sectoral and thematic funds, it is essential to be cautious as these funds undergo cyclical performance. Overinvesting in these categories can expose your portfolio to unnecessary risk, particularly if you enter in the wrong cycle,” Amitabh Lara recommended.

“Many investors fall into the trap of chasing historical returns, only to discover that the sector has already peaked. Thus, for investors who are not adept with market knowledge should avoid this category as tactical movements will be required,” he added.

There are around 21 equity mutual fund categories. Among all equity categories where should investors invest? How should they go ahead?

Investors should not always invest in one category. A diversified allocation can help in creating a robust portfolio by investing in diversified funds for the long term.

“As you embark on your investment journey this Diwali, remember that a disciplined approach is key. By focusing on a diversified allocation and being mindful of the cyclical nature of sectoral funds, you can create a robust portfolio by investing in diversified funds for the long term that stands the test of time, ultimately setting the stage for long-term wealth creation,” Amitabh Lara recommended.

Investors should always make investment decisions based on risk appetite, investment horizon, and goals.

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