How do I find the best mutual funds for the next 10 years? [The VS-S-M-L-VL Rule]

post image

Last week, I visited a nearby retail clothing store to buy some party-wear shirts.

I asked the shopkeeper, Can you show me some options?

His first question was, Sure, sir. What size do you wear? XL, I replied.

He then brought out a range of shirts, different colors, designs, and fabrics, all in my size.

After trying a few, I picked two.

He packed them, handed me the bill, and that was it.

It was a simple transaction. Nothing extraordinary.

But it struck me.

The very first thing he asked was my size.

Why? Because one size doesn’t fit all.

Some shopkeepers go a step further. They ask about your fabric preference. Your budget. What occasion do you need it for?

I realized investing is no different.

Just like you choose clothes that fit your body and style, you should choose mutual funds that fit your financial goals and risk profile.

Let us understand this concept in detail:

The VS-S-M-L-VL Rule.

  • VS: Very short
  • S: Short
  • M: Medium
  • L: Long
  • VL: Very long

This simple rule categorizes your financial goals into five categories.

  • Very short-term: 1 day to 365 days
  • Short-term: 1 to 3 years
  • Medium-term: 3 to 5 years
  • Long-term: 5 to 10 years
  • Very long-term: More than 10 years

Once you know where your goal falls on this scale, you can select the appropriate investment to achieve the goal.

Simple yet effective.

If it is so simple, why do people struggle to achieve their goals?

Because people invest emotionally instead of strategically.

A real case study:

Mr Vineet, a 30-year-old software engineer, lost nearly 40% of his investments within two years.

He was not a gambler. He was a disciplined saver. But he had no goal.

He invested based on YouTube tips and the article - Top 5 funds to invest in 2023.

One of his biggest mistakes was investing in small-cap mutual funds (suitable for long-term wealth creation) for short-term needs like his sister's wedding.

When the market dipped, he had to exit at a loss.

The mistake is common. Vineet had money and the intent but lacked direction.

He had no idea of the time frame for each of his life goals. So, he could not choose the right investment vehicle without a time frame.

So, what should be the approach?

Map your life goals using the VS-S-L-ML-VL framework.

For Very Short-Term goals, you should not chase returns — chase safety and liquidity. Best-suited ideal investments for Very Short-Term:

  • High-yield savings accounts
  • Liquid mutual funds
  • Fixed deposits with auto-renewal

For Short-Term goals, safety still matters, but returns can be modest. Best-suited ideal investments for Short-Term:

  • Recurring deposits
  • Ultra short-term debt mutual funds
  • Short-term corporate bond funds

Medium-term goals need a balance between growth and protection.Best-suited ideal investments for Medium-Term:

  • Hybrid mutual funds (conservative or balanced)
  • Short-duration debt + equity mix (60:40 or 70:30)
  • Gold ETFs for specific cultural events

Long-term goals allow for more equity exposure, with a fallback to stable assets near maturity.Best-suited ideal investments for Long-Term :

  • Flexi-cap or multi-cap mutual funds

Very Long-Term goals benefit from the power of compounding. Time is your biggest ally.

Best-suited ideal investments for Very Long-Term :

  • Equity mutual funds (Index funds, Flexi-cap, ELSS)

Next steps

  • Write down your goals
  • Assign a time frame
  • Define the amount needed
  • Define the amount needed
  • Monitor

Review and rebalancing are necessary because investing is not a set-it, forget-it process.

Would you like a professional expert to help you out with this process?

Get in touch with Swaraj Finpro. Call +91 9993025625 or Email us at swarajfinpro@gmail.com.

Description: Discover how to pick the best mutual funds using the VS-S-M-L-VL rule based on your financial goals and investment time horizon.