5 Things to Check While Creating a Mutual Fund Portfolio for a Goal

5 Things to Check While Creating a Mutual Fund Portfolio for a Goal

 

 

1. Get a Fix on the Time You Have

Ask yourself about the time left for your financial goals like buying home or children’s higher education. This will help you decide on the right category of mutual fund (MF) scheme. For instance, invest in equity funds for long-term goals such as retirement and children’s education, since they have high long term returns potential despite higher risks. Debt funds, lower in risk, work well for shorter term needs like down payment for home that could be 3-4 years away.

 

 

2. Check Your Risk Bearing Capacity

Mutual funds offer multiple options to choose from. If you are not comfortable with the higher risk of equity funds, consider lower risk alternatives like balanced or hybrid fund. They invest in mix of debt and equity.

 

3. Determine an Investment Amount You Are Comfortable With

Arrive at the amount that you will be comfortable investing regularly over the long term. Start with a small amount in an SIP. Keep increasing the amount of SIPs in funds you gain in confidence, get investment ideas and try containing investment risks through diversified MF investments.

 

4. Do Homework on the Scheme and its Performance Track Record

Make sure to invest in a scheme whose objective and investment philosophy you understand and are comfortable with. You also need to have confidence in its short and long-term track-record. Remember, one laggard in your portfolio may drag down your overall portfolio’s returns drastically.

 

5. Restrict the Number of Schemes

Do not invest in too many schemes. For instance, 4-5 equity schemes if chosen carefully are enough for diversification. This also makes managing the portfolio and tracking performance simpler. Avoid schemes with the same themes or which invest in the same securities.

Happy Investing