Which funds should I choose for the purpose of starting an SIP?

livemint.com:

I am 23 years old and want to start a systematic investment plan (SIP). Which funds should I choose for this? I am also interested in exploring alternatives. —Preet Starting the investment into mutual funds early is a wise decision and your plans to invest through SIPs are the ideal way to build a good corpus over the long term. SIPs help you to invest gradually and average out your investment cost as you regularly keep investing across months and years.

A good way to begin investing and building your portfolio is to identify financial goals and invest based on these goals. At this age, you may have goals like wealth creation, buying a vehicle, building corpus for a new home, etc. Each of these goals can have a timeline and target amount.

This could help you to decide on the right investment for the right goal. At present, if we consider the goal as wealth creation, which can be for a period of up to 7 years, then you can start the SIPs in equity mutual fund. As you are starting young, you have the benefit of investing for the long run.

At the same time, it also gives you the appetite to take some additional risk. However, in the beginning, it is better to consider investing in large-cap oriented mutual funds. Once you get comfortable with the way equity mutual fund works, you can add mid-cap and small-cap funds which have the potential to generate higher returns but also carry additional risk.