Mutual Fund Portfolio

A mutual fund portfolio refers to mix of different mutual funds carefully chosen by an investor to form a diversified investment blend. It helps to distribute investments across various asset classes, sectors, or geographic regions.
Mutual Fund Portfolio
3 min
10-June-2024

A mutual fund portfolio is a mix of investments in different types of mutual funds based on varied underlying assets like equity, bonds, and others. Balancing investments in different asset classes allows investors to capitalise on gains and minimise their overall risk exposure. While your MF portfolio is tailored to suit your financial objectives and risk tolerance, curating one can be difficult for beginners. To help you streamline your investment approach, this article covers what is a mutual fund portfolio, how to build a mutual fund portfolio, and how to track its performance in detail.

What is a mutual fund portfolio?

Mutual funds can be broadly classified on the basis of their asset classes, investment objectives, and structure. A mutual fund portfolio is a collection of various mutual fund investments owned by the investor. This portfolio typically includes a variety of funds picked to meet specific investment goals and risk tolerance levels. Portfolio composition is determined by factors like your age, investment horizon, and risk appetite. Investors can choose from different types of mutual funds, including equity, debt, bond, indexes, and sector-specific funds to diversify their investments and mitigate risks. For instance, you can opt for a mix of equity and debt funds to balance risks and returns or reduce sector-specific risks by investing in the tech, healthcare, and fintech sectors via different sector-specific MFs.

Why should you create a mutual fund portfolio?

Curating a portfolio for mutual fund investments is a smart strategy for the following reasons:

Diversification for reduced risk

Building a mutual fund portfolio allows you to spread your investment across various asset classes like equity stocks, bonds, and others, lowering the overall investment risk.

Professional management

The investment portfolios of a mutual fund are overseen by professional fund managers. Fund managers use their expertise to analyse markets, research companies, and adjust portfolios to maximise returns for investors.

Accessibility for small investors

Curating an MF portfolio allows even small investors to invest in a wide range of investments and reap the benefits of market-linked returns. In fact, you can start an SIP investment with as little as Rs. 100 per month.

Convenience and simplicity

Managing individual investments in a portfolio can be challenging for those with limited knowledge and time. However, when you invest in a mutual fund scheme, the fund manager takes care of asset selection, market monitoring, and performance tracking responsibilities.

Liquidity and transparency

MFs are liquidity investment avenues. You can easily buy or redeem your unit on any business day based on their NAV (Net Asset Value) for the day to meet urgent cash flow requirements. Since NAV is updated daily, you have complete transparency about the value of your investment.

How to build a mutual fund portfolio?

Here’s a step-by-step run-down on how to build a mutual fund portfolio:

Set your goals and risk tolerance

Outline your financial goals - be it buying a home, higher education, or retirement planning. Next, evaluate your risk appetite. This involves understanding how much risk you are willing to take on.

Research and choose funds

With your goals and risk profile in mind, consider various types of mutual funds including equity, hybrid, debt, and balanced funds. Carefully evaluate factors like the fund’s past performance, expense ratio, and the fund manager’s credentials.

Diversify your investments

Avoid putting all your eggs into one basket. Diversify your mutual fund portfolio with different types of funds and sectors to hedge volatility associated with a single fund type/sector. For instance, you can curate a mix of domestic equity funds and international mutual funds or a mix of sector-specific funds and broad-market index funds.

Allocate your assets

Based on your investment objective, risk profile, and time horizon, decide on how much you wish to allocate to different asset classes in your portfolio. Young investors can opt for a higher equity exposure for potentially better returns over time, while those nearing retirement can benefit from the stability of debt asset investments.

Regularly review and rebalance

Periodically reviewing and rebalancing your mutual fund portfolio keeps in tune with changing market trends and your evolving financial goals. Rebalancing helps maintain the original asset allocation plan which may have shifted due to varied sectoral performances.

Factors to consider before building a mutual fund portfolio

Financial goals

Your mutual fund portfolio needs to align with your investment goals. In other words, you need to select assets that can deliver risk-balanced returns needed to achieve your goals. For instance, stable investments may be better suited for short-term goals like planning a vacation, while a mix of equity and bond investments may work better for long-term goals like retirement planning.

Risk tolerance

Evaluating your comfort level with risk helps select funds that best match your risk profile. Consider factors like age, income, and your general temperament towards risk. Depending on how much risk you can tolerate, your portfolio may be conservative, aggressive, or balanced.

Diversification

Spread your investment across various assets to mitigate investment risks. Curating a diversified mutual fund portfolio with exposure to different types of securities will help you weather market swings.

Expense ratios and fees

Expense ratio is the annual fund management charges levied by the AMU. Carefully considering exit loads, transaction charges, and the expense ratio associated with your MF portfolio is important to avoid excessive fees from lowering your overall earnings.

How to monitor mutual fund portfolio performance?

Acknowledging the meaning of a mutual fund portfolio is not enough, you also need to monitor its performance to ensure it aligns with your goals and objectives. Here’s a guide on effectively monitoring your MF portfolio’s performance:

  • Review regularly: Scheduling quarterly or semi-annual reviews can help effectively track your portfolio’s performance. While periodic reviews can help you understand if rebalancing is required vis-a-vis market and sectoral performance and trends.
  • Compare with benchmarks: Relevant benchmarks can help you assess the performance of your MF portfolio. Comparing your portfolio’s performance against market indices and comparable mutual funds helps you gauge how well your portfolio is performing.
  • Assess returns: Assess risk-adjusted returns from the portfolio. Weigh the fund’s volatility against the average returns over time.

Conclusion

In summation, curating a mutual fund portfolio is essential for investors to secure inflation-beating returns that meet their investment objectives and risk profiles. The tips mentioned above can help investors curate a diversified portfolio, track portfolio performance, and rebalance whenever needed.

If you are looking to explore different mutual fund schemes and curate a portfolio, you can do so on the Bajaj Finserv Mutual Funds Platform. This platform makes it super convenient to compare over 1000 mutual funds, spreading across sectors and asset classes. Additionally, with digital tools like Step-Up SIP Calculators, SIP Calculators, and Lump-Sum Calculators, you can curate your desired MF portfolio based on your preferred contribution frequency and estimated returns.

Calculate your expected investment returns with the help of our investment calculators

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Frequently asked questions

What is a portfolio with examples?
A portfolio is a collection of all the investments and assets owned by an investor. For instance, an investment portfolio can include stocks, bonds, mutual funds, money market instruments, real estate, and ETFs owned by the investor.
What is a good mutual fund portfolio?
A good MF portfolio involves a well-balanced and diversified mix of investment in various asset classes and sectors. A good portfolio must align with the investor’s needs and risk tolerance levels.
Is a portfolio a mutual fund?
Apart from an investor’s MF portfolio, each mutual fund scheme also comprises a separate portfolio of underlying assets. Portfolio of a mutual fund refers to the stocks, bonds, and other securities it invests in with the funds pooled from investors.
What is called the portfolio of funds?
Portfolio of funds is a collection of all the different mutual funds the investor owns.
How can I check my mutual fund portfolio?
You can sign into your AMC’s website or mobile app to check your MF portfolio.
Can I manage my mutual fund portfolio online?
Yes. Most brokerages and investment platforms allow investors to manage their MF portfolios online.
How do I find my mutual fund portfolio?
You can sign into the investment platform’s app to review your MF portfolio.
What is the difference between a fund and a portfolio?
A fund refers to the pooled contributions from different investors that invested in varied assets and managed by professionals. A portfolio, on the other hand, refers to the collection of all the assets of a single individual investor which can include multiple funds and other assets.
Which mutual fund portfolio is best?
The best MF portfolio varies from one investor to the next based on the individual’s risk appetite, investment goals, and time horizon. That said, generally a well-diversified portfolio with investments in different asset classes helps balance risk and returns.
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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.