Choosing Between Multicap and Factor Funds for Long-Term SIPs

Original: Which mutual fund should you add for 15-year SIPs? Expert breaks down multicap vs factor funds

The Economic Times•Apr 3, 20263 min

In a Nutshell

Renu, an investor from Delhi, seeks advice on adding either a multicap fund or a factor-based index fund to her existing portfolio for a 15-year investment horizon. Financial expert Harshvardhan Roongta suggests that while her current portfolio is well-diversified, the choice should align with her risk appetite and investment understanding.

Key Points

01Renu currently invests ₹35,000 monthly in mutual funds and seeks to add ₹10,000-₹15,000 more.
02Her existing portfolio includes mid-cap, small-cap, flexi-cap, and contra funds.
03The Edelweiss Nifty 500 Multicap Momentum Quality 50 Index Fund uses a rule-based strategy focusing on momentum and quality.
04An actively managed multicap fund like Nippon India Multicap may be easier for retail investors to understand.
05Investment decisions should consider risk appetite, understanding of the fund type, and long-term goals.

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Full Summary

Renu, an investor from Delhi, currently invests ₹35,000 monthly in mutual funds, totaling a SIP corpus of ₹4 lakh. She is considering adding ₹10,000-₹15,000 per month for a 15-year horizon. Her existing portfolio includes various funds, such as Motilal Oswal Midcap and SBI Contra. Financial expert Harshvardhan Roongta advises that her portfolio is well-diversified, and any additional investment should complement her current holdings. He compares the Edelweiss Nifty 500 Multicap Momentum Quality 50 Index Fund, which follows a rule-based strategy focusing on momentum and quality, to actively managed options like Nippon India Multicap. While the factor-based fund may appeal to those comfortable with volatility, Roongta suggests that simpler, actively managed funds may be more suitable for most retail investors. Ultimately, Renu's decision should align with her understanding, risk appetite, and long-term financial goals.

Key Figures

₹35,000

Current monthly investment by Renu

₹4 lakh

Total SIP corpus

₹10,000-₹15,000

Additional monthly investment Renu is considering

15 years

Investment horizon Renu is planning for

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Why It Matters

Choosing the right mutual fund can significantly affect Renu's long-term wealth accumulation, influencing her returns over the 15-year investment period.

Who is affected

Investors like Renu who are planning for long-term investments in mutual funds.

What to know

Investors should evaluate their understanding of different fund types and align their choices with their financial goals.

FAQ

Multicap funds are actively managed and rely on research-driven stock selection, while factor-based funds use predefined criteria like momentum and quality to select stocks.

Consider your risk appetite, understanding of the fund type, and long-term investment goals before making a decision.

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