For the past three to four years, the stock market has been giving great returns and so as mutual fund equity schemes which ultimately invest in stock markets. There is a large number of investors turning towards mutual funds and especially starting systematic investment plannings (SIP) and this number is on a constant rise and will continue to remain so. But, one of the biggest hurdles for a mutual fund investor is to decide which schemes to invest in, as there are hundreds of schemes to select from.
At times, creating a portfolio of few selected schemes which will help you achieve your financial goals becomes too much complicated for you. So, let me suggest three different mutual funds’ portfolios based on your risk appetite and investment style. Let us divide these investors as a conservative, moderate and aggressive ones.
Before looking at the schemes, you may invest in based on your investment objectives and risk appetite. You also need to understand how a portfolio of various mutual fund schemes is created.
Steps to create a good MF portfolio:
1. Select few schemes which have a good & consistent performance over the years.
2. Now out of these proven funds list, further shortlist schemes which suits your risk profile and financial goals and objectives.
3. Finalise the percentage of the money you would invest in each of such schemes is also an important task.
4. Once you finalise the amount you would be investing in each scheme, you need to create a mechanism to monitor your funds at regular intervals, do a thorough review and take corrective actions, if needed. This step is very critical and you must follow it diligently as mutual funds investments are subject to market risk and volatility and any big or small news affecting the economy and market at large will have an impact on your portfolio, both positive or negative. So, always be diligent and agile while monitoring your portfolio and take actions accordingly.
Please find below an equity mutual fund portfolio along with the history of returns, I have created for your mutual fund's SIPs by diving them into three different risk categories as mentioned above. Please note that I have considered only equity oriented funds and balanced funds (which are also equity oriented) in my recommendation. Some of the underlying assumptions are that you will be investing it in these funds via SIP route for a minimum period of say four-five years. In my below-recommended portfolio, I have assumed an investor ready to invest Rs 20,000 per month and the allocation based on his risk appetite is suggested accordingly.
Returns, as mentioned below, are as on 25th April 2018.
The writer is chartered accountant and chief gardener of Money Plant Consultancy
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