A Model Mutual Fund Portfolio means a perfect portfolio suitable for everyone. However, in the real life, there is nothing called as a perfect mutual fund portfolio. The reason is financial goals, risk profile and investment preferences of every individual are different. So, the portfolio building exercise includes multiple factors such as the age of investor, financial goal, risk profile, time horizon etc. Let’s try to understand the basic process of building a Mutual Fund Portfolio.
How to build a Mutual Fund Portfolio?
A step by step method used for building a mutual fund portfolio is given below.
- The first step in building a portfolio is defining a financial goal. Once you are done with defining your goal it becomes easy to build a portfolio.
- If your goals are short-term you can invest in fixed income investment. Fixed income investments are the best choice for short-term investment horizon. Here the meaning of short-term is less than 3 years.
- The next is deciding financial target and risk factor. If you can answer risk and returns precisely you have won the battle. E.g You can invest “X” amount every month and you will need “Y” amount after 3 years for your daughter’s marriage.
- Once you are through with this you need to start building your portfolio. As you have investment horizon and risk profile it will be easy for you to build the portfolio.
- You can either build a single common portfolio for your all financial goals or make an individual portfolio for individual financial goals. The second method would be difficult but surely give better results.
Also Read – How to Apply Loan against Mutual Funds for Financial Securities?
If you want to build your portfolio but don’t know which mutual fund scheme to select? Or you have already invested in a mutual fund but not sure if they are appropriate? Whatever be the case, I am herewith 3 model mutual fund portfolio for 2018.
These mutual fund portfolio should not be considered as a verdict for the investment. It is given here for the reference only. You can design your own portfolio on similar lines, based on financial goals, age, risk profile and other factors. Three types of portfolios are given Aggressive, Moderate and Conservative.
Model Mutual Fund Portfolio for 2018
Aggressive Profile
This type of mutual fund portfolio is best suited for the young individuals who have begun to earn money. They have very low or no financial obligation. The typical age group would be 20-35 Years. These type of investors are willing to take a risk for high return. They are not afraid of stock market uncertainties.
Recommended Post – MoneyWorks4me – Mutual Funds and Stock Decision Making Tool
The best-suited mix for these type of investor would be a small cap, mid cap funds along with multi-cap funds.
Moderate Profile
The moderate investors are slightly older. Typical age group would be 35-50 Years. They have financial responsibilities. However, they are willing to take some risk with finances. For moderate risk investor, a portfolio with the addition of large-cap and balanced mutual fund with optimum allocation will do.
Conservative Profile
The conservative investors are a risk-averse investor. Protection of capital with small growth is their preliminary concerns. They are nearby retirement age typically above 50 years. They cannot afford the risk of the equity market. For these type of investors debt oriented schemes along with MIP are recommended mix. In addition to this small percentage of investment can be made in safe large-cap funds.
Note – Number of funds in your portfolio should not exceed certain limit. Ideal count would be 5-7. It will help in effective management and monitoring of the funds. The SIP amount in these funds depends purely on your financial goal and horizon.
Disclosure – I have done SIP in SBI Magnum Multicap Fund & HDFC Balance Fund.
Do share your queries and comments.
Subscribe to our blog and get latest updates in your inbox.
