Consider investing in direct stocks only if you can monitor portfolio proactively

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I want to invest for my six-year-old child for the next 30 years. Please suggest a few mutual funds or direct equity investments that I can invest in.

—Deepak

Your investment plan is catering to the long-term need of securing your child’s future. The advantage of long term is that you can consider equity as an asset class to deliver an inflation-adjusted return as well as generate a compounding effect for your portfolio.

Since you are willing to invest in the equity asset class, it is recommended that you prefer investing via the mutual fundroute versus direct stocks. Direct stocks can be considered if you can monitor the portfolio proactively and have the ability to do research to identify the stocks.

With mutual funds, it becomes relatively easier as your portfolio is managed by professional fund managers with an established and proven track record. You have an option to invest in large-cap funds as well as mid- and multi-cap funds. This will further depend on your risk appetite; you can check their performance across time horizons. Along with low costs, your portfolio can be well managed.

You can create a diversified portfolio wherein a combination of large-, multi- and mid-caps can be your core portfolio. The investments can be made via systematic investment plans (SIPs).

You should be revisiting your monthly savings on an annual basis and if possible increase it every year at least by the inflation rate or by the increase in your income. The schemes selected should also be reviewed on a periodic basis and if any underperformance persists then it can be changed to a better performing scheme.

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