Introduction
A mutual fund is a pool of money that is managed by a qualified fund manager, mutual fund investment is one of the best investment options that every investor wants to invest and it gives risk free rate of return and investors get the freedom to select and choose specific stocks. But in this article, we will discuss how anyone can build a profitable mutual fund portfolio.
Key point focus toward building a mutual fund portfolio.
1- Decide financial goal:- If you want to build a mutual fund portfolio first you should decide your financial goal. Why do you want to build a mutual fund portfolio and what will be your investment horizon? It may be your financial goal for children’s education, retirement planning, or achieving any other financial milestone.
2-Decide investment options:- After deciding on a financial goal now it is very important that which mutual fund investors can invest in either equity mutual funds, debt mutual funds, or any other sector. But mutual fund investment always tries to invest for the long-term and balanced mutual fund investment is necessary it means some percentage of funds should go to a debt mutual fund and some to an equity mutual fund.
3-Diversification of mutual fund portfolio:- Do not park your money at one place so always try to park your money in a large cap, medium cap, small cap, or flexi cap in this way you can invest. And most important thing to keep in mind while building a mutual fund is to park your total fund in different mutual funds, 60% invest in equity mutual, 30% in debt fund, and 10% in gold. In this way you can do diversification and diversification is very important for building an effective mutual fund portfolio.
4-Systematic investment plan:- If you want to make more corpus SIP is the best option for investing long term, it is my perspective that I have seen and calculated sip gives more return than lumpsum. SIP is a very disciplined approach to investing, helping you to reduce the fear of market volatility, start small, and reach big, Investors should increase gradually SIP investment every year and it is also suitable for long-term equity mutual fund investments.
5-Rebalancing and periodic review:- Every year we should check and review the mutual fund portfolio and check the performance of funds if any fund is not performing well for one to two years replace it with well well-performing fund.
6- Maintaining long-term commitment:- For continued growth, it is very necessary to make some important adjustments and regularly assess the mutual fund portfolio, one thing every investor also keep in mind is to always try to invest for a long period of time If you invested for longer period its rewarding good return.
Key factors to consider
1)- Expense ratio:- The expense ratio is the commission that every fund manager or AMC charges from investors basically 1% commission charge by every AMC means if you invested 100 Rs so 99 Rs will be invested for the investor and 1% as expense ratio AMC will charge as commission.
2)- Fund manager performance:- Before choosing any mutual fund scheme first check the performance and qualification of the fund manager then decide to invest because fund management is not an easy task, well established and experienced person can manage effectively.
3)- Fund rating:- Fund rating is also a great parameter to selecting a mutual fund scheme and 4 to 5 rating mutual fund scheme is a great choice as per the big player.
4)- Risk appetite:- Before investing in a mutual fund investors should check and measure his or her risk appetite and then invest in a mutual fund scheme.
5)- Compare with the alternate fund:- Every investor should compare alternate mutual fund schemes in which investors are going to invest. Check the past performance record of alternate funds then decide to invest.
6)- Tax Planning:- 20% charge as tax if the investor redeems a mutual fund within a year and 12.5% charge as a tax if the investor redeems a mutual fund after one year.
Conclusion
A mutual fund option is a safe secure and risk-free return investment, various types of mutual funds exist and as an investor, you have to invest in it most importantly every investor should invest for a long period of time and also keep in mind while investing in mutual fund scheme is that portfolio of mutual fund should always diversify and 60% fund should go for equity and 30% go for debt and 10% go for gold so in this way you can make it effective investment portfolio.