As you are mentioning you are just starting to invest, mostly you should first be looking at building your emergency fund corpus and insurance planning (Term Life Insurance, Personal Accident Insurance and Health Insurance). If you’ve already taken care of those and are ready to start investing towards other goals, specifically this goal of providing for marriage expenses (which is 4 years from now), you may consider investing in schemes under Conservative Hybrid and Balanced Advantage Categories. These schemes provide superior risk adjusted returns over medium term horizon.
Financial Planning is all about goal based investments. It is very heartening to note that you have started planning for your marriage expenses as soon as you have started earning. This gives you the best chance for meeting this goal (and future goals) in a planned manner.
Equity gives the highest long term compounded growth rate and therefore on a generic basis would recommend investing regularly into the same at this stage of your life journey and especially so as your goal is 4 year away (reasonable time horizon to let equities compound). You could use Systematic Investment Plans (SIPs) to add to your investment kitty month on month. Within equity, you may wish to diversify your portfolio across Large Cap & Mid Cap as you start learning about the world of investments and fine tune the same based on your preferences as you understand them better. You could take help of a financial advisor whom you trust because aligning your investments to your risk profile is crucial for long term success.
They key towards a smother experience of using the funds when you need, as you reach closer to your goal date (4 years from now), you would need to continue to book profits from equity and put in less volatile asset classes – so that you are not dependent on market movement on the day you need the funds.
Considering that you have a short to medium time horizon for saving for this goal, you should look at a mix of short term debt funds and dynamic asset allocation funds.
The short term debt funds with a good AAA portfolio would help to generate steady returns with low volatility. While choosing debt funds, due attention should be given to the quality of portfolio in order to avoid facing difficult situations on account of low quality credit issuers.
Dynamic asset allocation funds change allocation between equity and debt based on equity index levels. As the equity indices rise, these funds reduce the equity allocation and vice-versa. Therefore, the dynamic asset allocation funds would help lower volatility in the capital invested and at the same time generate better returns than pure short term debt funds. The main mandate of these funds is to rebalance asset allocation on a monthly basis so that investors can benefit even in the situation of volatile equity market movement. Therefore, while choosing funds in this category one should try to see if the fund manager has displayed the ability to actively rebalance the asset allocation in different market environments
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