How To Build A Mutual Fund Portfolio?

Investors make multiple investments in a year to increase their returns. Surviving on your income alone cannot assure a secure future. There are various investment tools that investors can opt for a financially secured background and pay for emergencies. An investor should write down all the investments they make in a year to check their allocation and the exposure to each asset class.

mutual fund portfolio includes various asset classes such as debt, equity, insurance-related savings schemes, gold, or even commodities. There are options within each asset class. For example, under equity, an investor can invest in large-cap, mid-cap, or even small-cap stocks. For maximising the total return, all investors should know their asset allocation. It helps them maintain a systematic investment strategy and diversifies their investments for regulating risks and maximise returns.

Risk and return have a mutual relationship when it comes to mutual funds. It is essential to take calculated risks, but there is a fine line between them and investment decisions. Riskier assets can produce high returns over time, but investors prefer shorter horizons. It results in financial losses owing to the goal of becoming rich instantly.

How does the portfolio get built?

Individual preference is about how to divide the mutual fund portfolio in India. 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 means you are a smart investor. Individuals having a higher risk appetite can increase it to 35 per cent. It happens either directly or through mutual fund schemes.

Investors can reserve about 20-35 per cent of their fixed deposit assets with at least 10 per cent in high-yielding FDs over eight to 10 years long tenures in a public-sector bank. They can consider high-yielding Corporate FDs as well with decent credit ranking. Both the MIS [Monthly Income Scheme] + RD [Recurring Deposit] combination of the Post Office and Public Provident Fund [PPF] offers decent 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 about 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.

Similarly, investors also get exposure to debt via mutual fund plans. Investors with higher risk tolerance can also diversify with around 10-15 per cent allocation into Gold ETFs. Consider an asset mix. Do mutual fund portfolio analysis monthly and rebalance the investments to boost the overall return.

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