The Best Way To Build A Mutual Fund Portfolio In Your 20s, 30s And 40s

The fundamentals of the right foundation for investment in a mutual fund portfolio begin with your own self-awareness. You need to understand your level of financial confidence, your understanding (or lack thereof) of the various investment options available to you, and most importantly, your goals: what are you saving for? Once you know what your goals are, you'll be able to make better decisions regarding which investments to make and how to structure a portfolio.

"One rule of thumb in determining how much equity you should have in your portfolio is to reduce your equity allocation by your age. Therefore, at age 20, you would have an 80% equity and 20% fixed income mix. At age 40, you would have a 60% equity and 40% fixed income mix. However, your investment mix should also be adjusted according to your investment objectives," said Sachin Jain, Managing Partner, Scripbox.

"If you are investing for the short term, you should have a larger percentage of your total assets allocated to fixed-income investments (for safety and certainty) than you would if you were investing for the long term (where you may want to take a greater percentage of your total assets allocated to equity in the hopes of earning a higher return)," recommended Sachin Jain.

Another factor to consider is the amount of cash you have available to invest. If you receive an unexpected cash inflow (inheritance), you have the flexibility to invest that money as a lump sum and create a diversified portfolio. However, if you have regular income, it's best to invest it systematically to build wealth over time.

As per Sachin Jain, here are the best ways to set up a mutual fund portfolio strategy for your 20s, 30s and 40s.

Portfolio Strategies at 20

The most valuable asset at an early age is time. Therefore, you want to have 100% of your investments in stocks and continue building your portfolio through regular contributions. Don't forget to diversify, learn about other investments, and use the more experienced investors around you to learn about new investments. You are allowed to experiment in your 20s, so don't be afraid to make mistakes while figuring out how each investment works; this will help you build confidence over time.

Portfolio Strategies at 30

At this age, you will have more responsibilities with a career and possibly starting a family. When creating your portfolio, you will need to balance your short-term and long-term goals. You likely have equity and fixed-income investments, as both are important to achieving your goals and a growing, stable portfolio.

Portfolio Strategies at 40

Your goals and responsibilities should be fairly clear at this point in your life. With this clarity, you should be able to refine your portfolio to reduce unnecessary risk and ensure your investments contribute to meeting your long-term needs. Investors will want to be more conservative, as making mistakes at this age can be costly; focus on discipline, planning, and long-term security with your portfolio.

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