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An Overview Of Building An Excellent Mutual Fund Portfolio

Mutual Funds and market risks go hand-in-hand. You must build an excellent portfolio to reduce the market risk and generate greater returns. They are specific investment strategies that permit you to merge your money with numerous investors to buy a collection of Bonds, Stocks, and other securities that can be difficult for you to recreate by yourself. This strategic plan is called a portfolio.

Various questions come to our minds when building a Mutual Fund portfolio. Investing in Mutual Funds to reach your monetary goals is the first step. However, you must adhere to other processes before investing:

Determining the investment objective

Before investing in Mutual Funds, determine your long and short-term financial goals, investment duration, and risk appetite. Deciding your investment objective will help you select a broad range of Mutual Fund types. Approach an Investment Banking expert for queries.

Analysing economic factors

The economic factors impacting the financial markets, nationally and globally, affect the portfolio and fund performance. They range from government decisions to industrial and market performances. You should invest when the country’s economy is stable and growing to gain good returns.

Deciding the strategy

You require a basic design to initiate the building process. A popular and time-tested portfolio design is the core and satellite. You start with the “core,” usually a large-cap stock fund representing the largest part of your portfolio. Around it, you build the portfolio with “satellite” funds, which can be middle-cap or small-cap funds representing the smaller parts of the Mutual Fund portfolio.

Asset allocation

The asset allocation (know more about asset allocation) classes include Equity, Debt, Balanced, and Liquid funds. Equity Funds provide greater market-linked returns with a higher risk. Similarly, Debt Funds invest in government securities, bonds, treasury bills, and other money market instruments. Balanced Funds invest in both equity and debt to provide higher returns from equity and lower risk from debt. Liquid Funds are the least risk-averse of all categories.


The future potential of any Mutual Fund portfolio depends on how consistent it is in generating returns in the past and how it has managed to be still on the top, performing to beat the benchmark and market cycles. Check the three and five-year returns before concluding with their consistency.

Asset Under Management

Asset Under Management refers to the fund size that shows its potential to generate returns. Experienced fund managers usually manage these flagship Mutual Fund schemes with a high AUM.

Expense ratio

The expense ratio is essential when choosing a fund as it takes away a significant part of the returns. According to the industry standards, 1.5% is ideal. The higher the AUM, the lesser will be the expense ratio.

Exit load

The Mutual Fund schemes are also time-bound. Investors must pay the exit load to withdraw from the plan before maturity.