Skip to main content

How to Balance Mutual Fund Portfolio?

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 



Everyone needs balance in their lives. So, too, do investors. They need a balanced portfolio – one that meets their goals. A balanced portfolio is one which encompasses a spectrum of investments, a range exposed to different asset classes, suitable to an individual, so as to avoid putting all one’s eggs in only one basket. One can go about doing this in various ways. For a layman, though, using mutual funds is a viable choice because of the wide range of options and the possibility of creating a portfolio suitable to specific requirements.

Overall options

Several choices are available.

One needs to look at the options in the market to achieve one’s objective. There are equity- oriented funds (which invest in large caps, mid caps and international funds), debt- oriented funds and gold funds.

There is ahuge range of debt- oriented funds, but exposure has to be considered as much depends on prevailing market conditions as well as the time frame available to an investor. The choice here would be stable funds, short duration ones and those open to interest- rate risk.

Equity funds

One area of focus has to be equity- oriented funds because these instruments provide growth momentum to aportfolio. Some large- cap funds in your portfolio act as a stabilising factor.

For those who are slightly conservative, the extent of exposure to largecap funds would be greater. For those looking for a balanced portfolio, overall equity exposure can be capped at around 45- 50 per cent. This would comprise large- cap, mid- cap and, maybe, international funds.

For an aggressive investor, who wants stability in a portfolio, the proportion of mid cap- funds would be slightly larger as these are more volatile, simultaneously bringing in a higher risk element. In mid- caps, too, alonger period could elapse before an investor sees returns. This would need to be considered. These funds have a minimum time horizon of at least four to five years, which enables them to perform and show results. Those wanting to diversify their portfolios even further can set a small exposure of around 5 per cent to international equity funds. These offer a different flavour to a portfolio.

Stable Debt Funds

In the portfolio of an investor there is usually some exposure to fixed deposits. This can be easily replaced by mutual funds, within which are products similar to fixed deposits – Fixed Maturity Plans (FMPs). An investor should ensure that wherever s/ he does not want the principal amount at risk and there is an element of surety in returns, the investment should be in these FMPs. The other option that can provide some element of regular returns are monthly- income plans, though since these have a small amount of equity they should not be considered as a sure source of income and hence should be used only for indicative purposes. The exposure to these two categories of funds in the overall construction of a balanced portfolio should be in the range of 20- 25 per cent.

Other Debt Funds

There are other debt funds that would be used mainly to ensure that debt exposure is adequate. This has two components: a small part can continue in short- term or liquid funds to ensure that the money can be used to invest in some opportunity that suddenly arises. The extent of the exposure to this section in the portfolio should not be more than 5- 10 per cent at any time.

Another 15- 20 per cent should be in funds that actually enable an investor to gain from the movement of debt instruments in the secondary market. If prevailing interest rates are high and expected to slide in coming months, this should be directed towards income funds that are available for investment. However, when the situation concerning the future is uncertain, an individual would do well to choose dynamic funds, in which the fund manager ends up making the right choice about the kind of instruments suitable for investor gains. Once again, the overall aim of an investment is to ensure a steady rise in returns on this part of a portfolio.

Gold Funds

The rest of the portfolio should go towards another asset class, namely gold, as this provides a different kind of exposure for an investor; it protects aportfolio from similar kinds of movements. This should not exceed 10 per cent of the total value and should be slowly built up over time. The real gain to an investor is when s/ he considers gold funds as longterm investment assets and s/ he has invested in this when prices have corrected.

This would enable her/ him to accumulate various units when the going is tough so that when prices actually go up s/ he is ready to earn returns. This calls for an element of patience because the asset cycle is longer than one sees with other asset classes, often running for over 10 years in a specific direction.

Overall Many options in mutual funds are available. It is the responsibility of each individual to check what is appropriate as they go about creating their own balanced portfolios. Utilising the right mix would be beneficial; even more important is the need to ensure regular re- balancing.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief ‘96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Read more

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...
Read more

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...
Read more

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now