Most people who do not seek the advice of professional advisors, usually tend to look at the last one-month or one-year returns and go for mutual funds that are relatively giving higher returns in comparison with their peers.
However, this is a rather simplistic approach. Selecting your funds should be based on a lot of factors, such as your investment goals, tenure and risk tolerance, among others. Here is a guide on what to consider when choosing a portfolio of funds and how to maintain it.
Step I: Portfolio Allocation
To start with, you have to decide your overall portfolio allocation. This is basically about deciding how much you want to invest in equity, debt, gold, and so on. Zeroing in on a particular fund is the subsequent step. Your portfolio allocation will depend on your investment objectives, risk appetite, and investment time horizon.
Let us say, you decide on an allocation ratio of 60:30:10 in equity, debt and gold. This allocation ratio will provide you with the basic framework on which you will proceed with the next step towards selecting the funds of your choice towards building your portfolio.
Step II: Category Allocation
There are multiple fund categories available, each with their own nuances. You have to understand either all the categories, or to keep life simple, know a few of them which you will go for. There are 11 equity fund categories, 16 debt categories, and six hybrid categories. Here are some relevant ones.
Equity Large-Cap: Large-cap stocks are the top 100 stocks according to market capitalisation. In other words, these are the leading 100 companies of the country. These are relatively less volatile than, say, small-cap stocks, but are subject to the usual market movements.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Gold ETFs And FoFs
While Indians love to invest in physical gold, even mutual funds offer the option, but in paper format.
PLANNING TO BUY CHILD INSURANCE? THINK TWICE
Child insurance plans combine insurance and investment but often offer low returns due to high costs, making a combination of a term insurance cover and mutual fund a better option for securing your child’s higher education needs
How Do You Define Happiness?
Money does buy happiness, but after a while, the appeal fades. We talk about our relationship with money, but, maybe, it’s time to revisit our relationship with happiness
Avoid Crypto As It Is Highly Volatile
I am 22 years old and have recently started working. I want to invest a small portion of money in cryptocurrency. How should I go about it? Does it require a huge capital investment?
Invest Right, Don't Speculate
The lure of high returns and quick gains from equity tips, cryptocurencies, and equity F&O can be enticing. But remember, return of capital is more important than return on capital
The Wedding & Budget: Is Minimalist Trend The Right Knot For You?
Indian weddings are known for their pomp and grandeur, but minimalist weddings are also in vogue now. Dia Mirza was one such celebrity who went for a minimalist wedding. If you also want to keep things minimal on your big day, here’s how to do it
Here's How To Buy An ETF?
Mutual funds are the preferred choice for retail investors. However, they come at a cost and fund management risk, apart from other risks. A smarter alternative is to invest through ETFs.
How Passive Funds Help Diversify
Passive funds provide a simple way to invest in broad markets as well as in specific themes and sectors, making them ideal for an investor's satellite portfolio
The Rise Of Passive Funds
The popularity of passive funds among retail investors has risen post Covid, and fund houses are out with many variations of ETFs and index funds. Does this category present a new opportunity for investors?
Tax Reforms: What's In Store?
The government is working on reforming the existing Income-tax Act, 1961. The impending reforms have raised many questions in the minds of taxpayers. Will the old regime and deductions be done away with? Will it really simplify your life? What's the need for these reforms? We try to answer these and other questions regarding tax reforms