How to Choose the Right Equity Fund for Yourself?

The stock market offers high long-term returns but also comes with significant volatility. Before investing in equity funds, it’s essential to clarify your financial goals and select a suitable fund accordingly.

Step 1: Define Your Investment Goals

Based on your financial situation and family plans, you can categorize investment objectives into three common types:

Education Fund for Children
Retirement Savings
Wealth Preservation & Growth

1. Education Fund for Children
Education is highly valued in today’s competitive society. Providing quality education requires long-term financial planning.

Example:

Goal: Save ¥1 million for overseas education in 10 years.
Current investable capital: ¥320,000.
Required annualized return: 12%.
Strategy: Moderate risk, stable growth.

2. Retirement Savings
While social security provides basic support, a comfortable retirement requires additional savings.

Example:

Goal: Accumulate ¥500,000 in 20 years.
Current investable capital: ¥74,000.
Required annualized return: 10%.
Strategy: Low-risk, steady returns.

3. Wealth Preservation & Growth
After covering basic needs, you may aim for higher returns to fund discretionary goals (e.g., property, travel, legacy planning).

Example:

Goal: Grow ¥494,000 to ¥2 million in 10 years.
Required annualized return: 15%.
Strategy: Higher risk tolerance for aggressive growth.

Step 2: Match Goals with Fund Styles

Equity funds typically follow three investment styles:

Value Style
- Strategy: Buys undervalued stocks (e.g., paying ¥50 for a ¥100 asset).
- Traits: Stable returns, lower volatility.
- Best for: Retirement savings.
Growth Style
- Strategy: Focuses on high-growth stocks (e.g., paying ¥100 for a future ¥1,000 asset).
- Traits: High long-term returns, higher volatility.
- Best for: Wealth growth.
Blended Style
- Strategy: Balances value and growth.
- Traits: Moderate risk/return.
- Best for: Education funds.

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