* Returns from fixed income instruments and gold are not able to beat the rise in prices over the long term, data show
* The only asset class that can beat inflation consistently is equities, data show. The only exception is real estate, but that requires a large outlay, is very illiquid and comes with exorbitant entry and exit costs
Equity MFs Best Option For Retail Investors
For retail investors, diversified equity mutual funds are the best way to invest in stocks. They are easy to invest in, require minimal paperwork and diversify the risk for the investor across a basket of stocks. Experts say equity funds should be the vehicle of choice when investing for long-term goals
Types Of Diversified Equity Funds
LARGE-CAP FUNDS invest mainly in large-cap stocks. These are stable and generally invest in the very big stocks and therefore tend to move with the market. Invest in large-cap funds if you want stable returns at a relatively lower risk.
MID-CAP FUNDS invest in mid-cap stocks. Their returns are generally higher than those of large-cap funds because mid-cap stocks have greater potential to grow. But this segment is also more volatile. Invest in mid-cap funds if you are looking for growth and can stomach some risk.
SMALL-CAP FUNDS invest in smaller (and generally, newer) companies. The risk is greater here because the companies these funds invest in are smaller and relatively new. But while they are vulnerable to downturns, small-cap funds have also generated the highest returns for investors.
MULTI-CAP FUNDS invest in a mix of large-,mid and small-cap stocks. These funds are required to invest at least 25% of their corpus in each of the three segments. This diversifies the risk.
FLEXI-CAP FUNDS are ‘go anywhere’ funds that can invest across market segments without any restrictions. Experts say flexi-cap funds should be the core of any long-term investment portfolio.