A reader asks, “Can I take advantage of only one mutual fund for all my monetary targets like retirement, baby’s schooling, and many others.? Or ought to I purchase separate mutual funds for every objective?” We assume the “one mutual fund” refers to an fairness fund.
The quick reply is you are able to do each. I choose separate mutual funds for every objective. For particulars, see Portfolio Audit 2023: The annual evaluate of my goal-based investments. I additionally know a number of buyers and advisors preferring simply 1-3 mutual funds for all monetary targets. This is called the unified portfolio, which we now have mentioned earlier than.
The freefincal robo-advisory monetary planning device gives each the unified portfolio technique and unbiased portfolios for every monetary objective. That is an illustration from the device.
The black arrows signify funding portfolios. The purple arrows signify systematic withdrawals earlier than every objective within the unified portfolio.
Issues to think about when utilizing the unified portfolio
- You should use a single fairness index fund (Nifty/Sensex) for the portfolio’s fairness element. You should use EPF (for retirement), PPF, fastened deposits or debt mutual funds. See: Which debt mutual fund ought to I take advantage of for long-term monetary targets?
- For those who choose, you should use 1-3 fairness mutual funds. Some buyers like to mix index funds with lively funds. That is completely high quality so long as the objective planning is powerful. See: The lively vs passive debate is just not necessary in portfolio administration.
- By no means mix short-term and long-term targets in a unified portfolio. They’ve completely different threat profiles. Ideally, all targets within the unified portfolio needs to be not less than ten years outdated.
- Have a risk-management technique in place earlier than you begin investing. A number of years earlier than the objective deadline, it’s higher to withdraw from the unified portfolio and hold apart the corpus wanted for that objective. That is illustrated above and included into the freefincal robo advisor device.
- Ideally, the final objective needs to be retirement.
Whether or not it’s an unbiased portfolio or a unified portfolio, neither technique is superior. It is just a matter of which is extra suited to our temperament. So as a substitute of asking others which is “higher”, we must always ask ourselves which might assist us sleep higher.
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