What makes an ideal mutual fund portfolio?

Updated: Friday, April 17, 2015, 15:01 [IST]

The portfolio of mutual funds, an investment option that lowers efforts on the investor's part to actively monitor and track the investment, should also be built intelligently depending on your long-term investment objective.

Nonetheless as in respect of other investment class, there are certain propositions held by experts that can be adhered to for realizing optimal results in the form of substantial returns.

why despite the known advantages of mutual funds, investment in them can sometimes be a hopeless proposition? why despite the known advantages of mutual funds, investment in them can sometimes be a hopeless proposition?

In respect of the number of schemes

For maximum and optimal gains from an investment, it is time and again advised to follow the golden rule of diversification in one's investment portfolio.

The same holds true even in case of mutual funds and as suggested the advantage that can likely be realised on account of diversification stands negated in case the number of schemes held in the MF portfolio increase over the prescribed schemes of eight.

In respect of the kind or nature of schemes and funds

Also, in respect of the schemes that should form part of the larger MF portfolio, nearly 60-70% of your corpus should be directed in schemes that have been for long performing well and you could remain invested in them for a couple of years.

However, further on the decision of your asset allocation in such schemes, risk profile of the investor also has a bearing.

Moreover depending on your intelligence in respect of the investment class, you can partake your investment in different available mutual fund scheme options.

So, if you are a novice mutual fund investor, you can plunge into funds that chiefly invest in large-cap stocks. Later, after ample research is done on the product, you can put your bet on schemes investing in mid-cap stocks.

As per financial consultants in the field, if one has an interest to lock in funds in mutual funds then with fund allocation across different schemes, investment can be well capitalized.

So, the different schemes as well as the number of such schemes that one should include in their portfolio are as follows 2 or 3 large-cap equity mutual fund schemes; a set of 2 mid-cap and small-cap oriented schemes; and either one or two tax-saving equity funds.

After the ideal portfolio mix of mutual fund schemes is established, in case your risk appetite allows and you wish to get kicker on your returns, you can decide on betting on a sectoral and thematic fund schemes. To know more about thematic funds. Click here.

But not to forget, holding over the prescribed eight mutual fund schemes shall not only mar the diversification benefit but will render you in a troubled situation to manage such an extensive portfolio.

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