How-to portfolio building asset allocation

How to build a balanced mutual fund portfolio

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Balanced MF portfolio with 4-5 funds covers all asset classes without fragmentation. More funds doesn’t mean more diversification; it usually means costly index replication.

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Market-risk disclaimer. Mutual fund investments are subject to market risks. Past performance is not indicative of future returns. Portfolio drawdowns of 20-40% are normal in deep bear markets.

Step-by-step procedure

See the procedure infobox above for the eight steps.

Sample portfolio (age 30, retirement focus, Rs 50,000/month SIP)

CategorySchemeAllocationMonthly SIP
Flexi-capOne flexi-cap35%Rs 17,500
Large-cap / IndexNifty 100 index20%Rs 10,000
Mid-capOne mid-cap15%Rs 7,500
InternationalNasdaq 100 FoF10%Rs 5,000
Corporate BondOne corp bond15%Rs 7,500
Liquid (emergency)One liquid5%Rs 2,500
Total6 funds100%Rs 50,000

Sample portfolio (age 50, balanced)

CategorySchemeAllocation
Flexi-cap / large-cap35%
Balanced advantage15%
Corporate bond30%
Short duration / Banking PSU15%
Gold / SGB5%

See also

External references

References

  1. SEBI (Mutual Funds) Regulations, 1996.
  2. SEBI Categorisation Circular, October 2017.
  3. Income Tax Act, 1961, Sections 50AA, 112A.
  4. AMFI Best Practice Guidelines.

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