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Article / Finance / Mutual Funds | Post Comments |
How to create a perfect mutual fund portfolio in the current volatile market |
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By : Rahul Agarwal , Delhi, India 24.12.2018 Phone:91 +11-43444-666,43444-623 Mail Now | |
A perfect mutual fund portfolio is one that is
commensurate with ones appetite for risk and is capable of meeting ones
financial goals. Once the required mutual fund categories have been identified, the next step is to choose the right schemes within a particular category. The selection criterion should hinge on the investment objective and consistency of returns that a mutual fund has been able to deliver. Efforts should be made to pick funds with larger assets under management and reputed brand names with a better track record of delivery. Total expense ratio is another important criterion: A fund with lower expense ratio is always better than funds with a higher expense ratio, other things being the same. Based on one's financial goals he/she would need to invest in both equity and debt mutual funds and would also have to pick several mutual fund schemes. However, it should be remembered that finalising the portfolio with too many funds is a bad idea as beyond a certain limit -- for example, a maximum six to eight schemes; there is no benefit of over-diversifying. Over-diversification leads to lower returns and monitoring and re-balancing becomes tedious for an investor. Finally, building a perfect portfolio is always based on suitable asset allocation that is derived from one's risk appetite and investment horizon. The perfect way of investment over the long term is continuous asset allocation focused on goal-based portfolio creation. Each goal should be precise, defined in quantitative terms and duration. (Rahul Agarwal is Director, Wealth Discovery/EZ Wealth advisory. The views expessed are personal. He can be reached at rahul@wealthdiscovery.in ) |