Youngsters, whose age is somewhere between 18 and 35 must look forward to invest in mutual funds. Retirement plans and pension plans need not be considered. They must think more aggressively. At the same time they must be careful not to lose out. Some of the possible types of funds that they can consider investing are described in this article.
The Emerging Markets Funds
Emerging markets funds invest in economies that grow very fast (like India, China, Brazil, Russia, Mexico etc.). These economies create wealth both at home and also for foreign investors. These funds have posted impressive returns. Many funds have given more than 50% return. However, in the current world economic scenario, such returns may not be possible consistently for a long time. But these funds tend to diversify their portfolio across different countries and mitigate several risk factors. Hence investing in emerging markets funds is a quick way to earn money.
Small-cap and Mid-cap funds
These funds are for those people who tend to take more risk than an average investor. Recent history says that the small-cap and mid-cap have consistently outperformed large-cap stocks. But there is no guarantee that it may continue to do so in the future too. These funds concentrate on growth stocks and therefore have larger returns but the major drawback in such stocks is their volatility. Therefore it is always better to invest in small-cap and mid-cap funds for a smaller period of time. Investment should be made in funds that have a diversified portfolio and smaller asset base (it means that the fund has enough flexibility).
Target 20XX funds
An adventurous person who wants to do a lot of things in life and at the same time save money over a period of time must consider investing in target 20XX funds. The portfolio of these funds will be biased in favour of equity to provide higher returns in the initial years. But over a period of time, it will be revised and more funds will be shifted to bonds to ensure safe returns before maturity. Hence these funds are the ideal foil for the passive investor who wants to have an adventurous life (or whatever) and get some money at a later date.
The Emerging Markets Funds
Emerging markets funds invest in economies that grow very fast (like India, China, Brazil, Russia, Mexico etc.). These economies create wealth both at home and also for foreign investors. These funds have posted impressive returns. Many funds have given more than 50% return. However, in the current world economic scenario, such returns may not be possible consistently for a long time. But these funds tend to diversify their portfolio across different countries and mitigate several risk factors. Hence investing in emerging markets funds is a quick way to earn money.
Small-cap and Mid-cap funds
These funds are for those people who tend to take more risk than an average investor. Recent history says that the small-cap and mid-cap have consistently outperformed large-cap stocks. But there is no guarantee that it may continue to do so in the future too. These funds concentrate on growth stocks and therefore have larger returns but the major drawback in such stocks is their volatility. Therefore it is always better to invest in small-cap and mid-cap funds for a smaller period of time. Investment should be made in funds that have a diversified portfolio and smaller asset base (it means that the fund has enough flexibility).
Target 20XX funds
An adventurous person who wants to do a lot of things in life and at the same time save money over a period of time must consider investing in target 20XX funds. The portfolio of these funds will be biased in favour of equity to provide higher returns in the initial years. But over a period of time, it will be revised and more funds will be shifted to bonds to ensure safe returns before maturity. Hence these funds are the ideal foil for the passive investor who wants to have an adventurous life (or whatever) and get some money at a later date.
SHARE
