How many mutual funds investments to include in a portfolio?

People make multiple investments in a year to increase their returns. Surviving on the salary alone cannot assure a secure future. There are many investment tools that people can use for a financially secured background and pay for emergencies. An investor should write down all the investments that they make in a year to see their allocation and what is the exposure to each class of assets.

A portfolio in a mutual funds investment consists of various asset classes such as debt, equity, insurance-related savings schemes, gold, or even commodities. There are several options within each asset class. For example, under equity, an investor can invest in large-cap, mid-cap, or even small-cap stocks. To maximise the total return, all investors should be aware of their asset allocation. It helps them maintain a systematic investment strategy and diversifies their investments to regulate risks and maximise returns.

Risk and return have a mutual relationship when it concerns mutual funds in India. It is essential to take calculated risks, but there is a thin line between them and investment decisions. Riskier assets can produce high returns over time, but people usually buy it for a shorter duration. It results in financial losses because of the pursuit of becoming rich quickly.

How are portfolios allocated?

Individual preference is about how to divide the investment portfolio. Strike a balance, boost returns, and minimise the risks through a combination of investment avenues.

Investing 10-15 per cent of the money in equity leads to smarter investment decisions. Individuals having a higher risk appetite can increase it to 35 per cent. It can happen either directly or by mutual fund schemes.

Investors can reserve about 20-35 per cent of their FD assets with at least 10 per cent in high-yielding FDs over the 8-10-year long tenures in a public-sector bank. They can also consider high-yielding Corporate FDs with decent credit ranking. Both the MIS [Monthly Income Scheme] + RD [Recurring Deposit] combination of the Post Office and Public Provident Fund [PPF] provide good tax returns. Investing in ELSS Mutual Funds also enables individuals to save up to 46,800 taxes in a fiscal year.

Hybrid/Balanced Mutual Funds invest in equity and debt instruments. They yield decent returns with lower risk. Invest in these with around 10 per cent of the total savings. For high-yielding debt instruments such as long-term bonds, assign about 10 per cent of the savings. Likewise, investors also get exposure to debt through mutual funds plans. Investors with more risk tolerance can also diversify with around 10-15 per cent allocation into Gold ETFs. Consider an asset mix. Evaluate and rebalance the investments to boost the overall return.

Comments are closed