With 8000 No of Schemes and a vast number of Mutual fund choices often confuse the Investors.
Investors will tempt to pick up multiple choices and category on their portfolio. But how to select the funds and how to build up your Mutual Fund Portfolio is both an art and science.
Your Mutual Fund Asset Allocation should be based on these 3 Criteria
- Your Return Expectations
- Your Risk Profiling and Risk Appetite
- Investment Duration
With these 3 criteria you may choose the following combinations of funds
- Hybrid Funds – 65% of Participation with Equity and 35% debt. This combination will allow moderate and conservative investors to participate and take home higher returns than Fixed Deposit
- Large Cap – Provide your stable growth and helps you to participate with blue chip companies ( Top 100 Companies with market capitalisation )
- Mid and Small Cap – These categories have great potential to deliver higher returns, but when a crisis happens, these are the first one to fall. Investors should have larger risk appetite to invest with this category
- Multicap and Flexi Cap – This category allows investors to get instant access to Large Cap, Midcap and Small cap. Best suited for diversification and high returns too. Every investor should have an exposure with this category. Most ELSS schemes are multi cap in nature.
Do not try to have all the categories to your asset allocation for the sake of diversification. When you have a huge number of schemes in your portfolio (More than 15) it gives only bloated and difficult to monitor and to review your portfolio.
Have only selected and high performing 5 funds in your portfolio. Remember schemes don’t get high returns, only the asset allocation will bring best returns for your wealth creation.
Also be remembered to review your portfolio every 3 months to check the performance of the funds as the financial markets are dynamic.
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Equity Fund Manager | Financial Consultant | Author
Founder – Creating Wealth Company
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