How to Build an Effective Mutual Fund Portfolio?
Taking an initial plunge into investment can be a nightmare, especially for the first-time investors. One is always surrounded by questions like: What should you buy? Where to invest? Which mutual fund is the best as per your requirement? And most of all, What if you end up losing money? For being a successful investor, there are various factors which need to be taken into consideration prior to taking the investment decision. Designing a productive portfolio being one of those typical tasks requires enormous efforts.
As an investor, you need to determine the allocation of assets to conform your personal investment goals and strategies. The portfolio must have the potential to meet your future needs of capital and give you peace of mind. One needs to follow a systematic approach for creating an investment portfolio that could help one in achieving financial goals.
Here we have provided a simple process for creating a portfolio of your online mutual fund investments:
- Consider Your Investment Needs :- The most important part of designing portfolio is to evaluate the reasons for investing. You must know why you want to invest and what are your goals to be achieved. It is obvious that without knowing the problem, solution cannot be generated. Similarly, if you would not have a set objective you would never be able to choose an appropriate investment plan for yourself.
- Assess Your Risk Tolerance :- The investors’ profile is ascertained after considering their risk-bearing capacity. Investment risks are divided in three main categories, i.e., conservative, aggressive and stable which have been classified as per risk and returns that they involve. Where aggressive style includes high returns with greater chances of losing money, the conservative style includes lower chances of losing capital with comparatively less returns. In the case of stable, the risk and returns are almost moderate.
- Determine the Appropriate Asset Allocation :- In accordance with your investment goals and risk profile, you need to evaluate where do you wish to allocate your funds. In the case of conservative style and gaining capital appreciation, the investors are recommended to allocate maximum funds in equities. For conservative style, the majority of the assets should be allotted in the debts instruments and in the case of moderate risk, the asset allocation must be equal.
- Choose the Right Investments :- Mutual fund industry offers a wide range of investment programmes to the investors which fall under three broad asset categories, viz., equity, debt and hybrid. As per the evaluation of assets allotment above, the investors are recommended to opt for the best investment strategy. The objective, portfolio and performance of the schemes must be accurately considered for selecting an apt programme.
- Reevaluate the Portfolio :- Once you make the selection of the appropriate investment schemes for your portfolio, you need to review the same. You must confirm that the mutual fund programmes that you have opted would yield the desired returns and fulfil your financial goals. Reevaluation keeps you assured of the desired results.
- Keep a Regular Watch :- Just like the management process, where controlling acts as an important step for better implementation and further planning; in the case of portfolio designing it is essential for keeping a regular watch. With this, it would become easier for the investors to maintain conformity to goals accomplishment. By evaluating the regular performance of the portfolio, it would become easier to select further schemes or programmes.
Making an investment plan and designing the portfolio for the same is indeed a tough job. But if it is done in a planned manner, it can be achieved easily. These steps as mentioned above would assist every investor in designing a productive portfolio.
If you further need any assistance in making better choices and taking appropriate decisions, then the team of MySIPonline would assist you. Our fund experts have great experience in the field of investment planning, and they will guide you better in creating an effective portfolio. You must get associated with us to feel the difference.
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