Proper asset allocation while investing in mutual funds

Which are the important points to keep in mind while choosing a mutual fund portfolio?

– B Hanmatha Rao, Medchal

Mutual funds offer investment solutions for various investment needs for investors of all ages and people from all walks of life. The handpicking of mutual funds depends on multiple parameters. The first and foremost things are the investment objective and the socio-demographic variables of the investor, such as age, employment status, marital status, and dependents.

The next essential parameters are risk tolerance, income, savings, return expectations and investment horizon of the investor. Another vital parameter is investors’ investment objectives, including various life-stage goals of investors, such as higher education of children, vacation planning, buying a car, buying a property, and retirement planning. Based on the investor’s information, financial advisors or mutual fund brokers would recommend the mutual funds to invest in.

One must also scrutinise the track record of the fund scheme, the experience and competitiveness of fund managers and the credibility of the Asset Management Company (AMC). Investors can obtain the information from the Key Information Memorandum and Factsheets of the mutual fund schemes. Chalk out a plan and tell your advisor how much and for how long you want to invest. They will tell you where to put your money. Financial advisors or mutual fund brokers build a mutual fund portfolio basis the investors’ risk appetite.

Liquid Funds would be best to invest for investors with a short-term horizon. Those who want to park a lump sum amount for a month or less than three months. Investors with long-term horizon and risk appetite may invest in Equity Mutual Funds and Balanced Funds to build a corpus for retirement over a long period. Equity funds are suitable for aggressive long-term investors.

Equity funds are the perfect choice for investors looking for capital appreciation in the long term. Equity mutual funds are the best choice for aggressive investors…

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