#MutualFundPortfolio

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Mutual Fund Advisor in India

Looking for a financial expert to secure your future? 🤔 Welcome to VSRK, India's leading mutual fund advisor. Our team of professionals is dedicated to helping you secure your financial future by providing top advice on the best investment options. We'll help you analyze your financial priorities and build the perfect portfolio for your needs. Start investing with us and take advantage of our expertise today.

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Is it the Right Time to Rebalance Your Investment Portfolio?

The Indian share market's bullish run has shocked many investors, especially after the low in March 2020 due to COVID-19. These movements in the market also impacted mutual fund investments. So, in this case, the bull-run SENSEX and NIFTY have compelled many investors to think about rebalancing their mutual fund portfolio.

What Is Portfolio Rebalancing?

In simple terms, portfolio rebalancing means restructuring the division of your mutual fund’s asset allocation from the present form to its initial stage. For example, you started your mutual fund portfolio with a 50:50 ratio of equity and debt, but now due to the rise of the stock market, this ratio has been changed to 60:40. In that case, for rebalancing, you need to take the excess amount from the equity part and put it in the debt section so that the ratio is in the original state.

When to Rebalance Your Portfolio?

Since the asset classes of a mutual fund portfolio are bound to change with either the rise or fall of the market, here are some factors that will help you understand when to go ahead with rebalancing your portfolio.

To Manage Your Asset Allocation

You must have started with either a growth portfolio or a value portfolio depending on a financial goal that you had in your mind. But, with the changes in the share value of multiple stocks, this balance would be skewed. So, if the new ratio is still aligned to your financial goals, you can move on with it. However, if these new changes have the potential to distort your original financial goals, then rebalancing becomes necessary.

Increase Debt Allocation

Mutual fund investments have the ratio of debt and equity set up as per the investor's requirement. In cases where the investor is nearing the retirement age, s/he will have to invest more in gold securities or Gilt-Edged funds. If the market has altered your debt-to-equity ratio to that extent that your retirement goals are impacted, then your first move should be to rebalance the portfolio in its original form, wherein the debt is given more weightage.

To Book Profit in Equities

When the share market rises, many investors are reluctant to book profits. On the other hand, when the market is bearish, the same investors would start panic-selling to book profits. However, since you are looking for financial goals in mutual funds, your decision to book profits depends on multiple factors even if it is to rebalance your portfolio. One such case is the tax liability, for long-term capital gains tax, you need to pay 10%, while that on short-term is 15%, so the rebalancing would be strategically done to save on tax and restructure your fund.

Rebalancing is all about identifying a suitable stock or asset class, which means that you need to be well aware of how the market will function in the near future, so that you do not have to rebalance it again. In case you need more information, get in touch with us.

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अपना निवेश पोर्टफोलियो कैसे बनायें? किस चीज़ का ध्यान जरुरी| रिस्क,लक्ष्य...

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Is Your Mutual Fund Portfolio Based On Your Risk Profile?

Barry Ritholtz, an American author, newspaper columnist, and equity analyst, has aptly said, “When it comes to investing, there is no such thing as a one-size-fits-all portfolio.”

Unfortunately, not many Indian investors understand the importance of customization of financial advice.

Take the example of Shashank and Shekhar.  Both of them are old friends.

Shashank is a 41-year-old techie and has an 8-year-old son and a 5-year-old daughter. He earns about Rs 1.5 lakh a month. His wife, Sushma is a housewife.

Shekhar, 43, is a banker and works as an AVP - Retail Liabilities with a private sector bank. His wife, Sumitra, works with a Public Sector Bank (PSB) as a business development manager. Together, they earn a little over Rs 2 lakh a month. Shekhar has a 10-year-old daughter.

Shekhar, being a banker, takes a keen interest in investing. He has earned a good deal of money by making smart investment moves.

Shashank mimics his friend Shekhar in investments. But he ends up selling his equity shares and mutual funds soon after these investments deliver negative returns in a volatile patch. This has been quite frustrating for him, as eventually the similar portfolio held by Shekhar recovers and makes profits.

Over the last 15 years, Shekhar and Sumitra have managed to create a portfolio of Rs 25 lakh and in next four years, they intend to pay off their housing loan completely.

Shashank and Sushma have managed to grow their investment portfolio only upto Rs 15 lakh and will require 10 more years to repay their home loan.

What’s creating such a difference?

Both the couples have some similar financial goals such as children education and retirement, but there’s a lot of difference in their existing circumstances and that’s making a lot of difference. Shekhar and Sumitra understood this; but unfortunately, Shashank and Sushma didn’t.

Comparative analysis…

Income level:

Shashank is the sole earner in his family of four.

Shekhar and his wife is a couple with double-income.

Dependency: Shashank and Sushma have two children, while Shekhar and Sumitra have just a daughter. This makes the former investor more risk-averse.

Awareness: Shekhar and Sumitra work in the banking and financial sector. They are more informed about the investment scenarios and macroeconomic trends. On the other hand, Shashank and Sushma aren’t abreast with macroeconomic developments and the factors affecting the performance of their investments.

Risk appetite: Shekhar and Sumitra have a higher risk appetite and their investments are in line with their risk appetite. On the contrary, Shashank and Sushma have lower risk appetite, but they often end up investing like aggressive investors. And when met with losses, they can’t sustain it and exit.

Moreover, Shashank doesn’t get much time to look after his investments nor does he take any professional advice.  This is why he, most of the times, relies on Shekhar to make investments.  Shekhar has recommended taking the help of a professional, but, Shashank ignored it. This has cost him a pretty penny.

[Read: Is Mutual Fund Categorization Affecting Your Portfolio? Review It Now!]

After making some big losses recently, he realized he needs professional guidance.

Do you mimic your friends too and wonder why something works for him/her and not for you?

[Read: Why Mimicking Your Friend’s Investments Can Be Risky]

It’s perhaps because he/she has customized the portfolio suited to his/her financial goals, current financial conditions, and the risk appetite.

Are you a busy professional who wants to seek customized advice that will help you meet your financial goals keeping in mind your risk appetite?

PersonalFN’s FundSelect Plus is the answer!

You may follow PersonalFN’s 7 High-Performing, Time-Tested Readymade Portfolios offered under FundSelect Plus. These portfolios are backed by decade-long market-beating track record.

Our recommended portfolios have outperformed the markets by as much as over 80%!

The best part is, these portfolios are crafted as per your risk profile and investment time horizon.

Plus, you also get access to  a special “Strategic Long Term” Portfolio and Tax Saving Funds Portfolio (to help you save tax under Section 80C of the Income-tax Act, 1961).

Exciting, isn’t it?

Want to know more? Click here.

Wouldn’t you want to be one of those lucky investors who could boast of their investment gains in the years to come?

Subscribe to Fund Select Plus today! If you subscribe right now, you will get additional 3 months access absolutely free! And if you aren’t happy there’s a 30-day full money back guarantee.

Had Shashank and Sushma subscribed to FundSelect Plus, they wouldn’t have made bad investment decisions.

Happy Investing!

Author: PersonalFN Content & Research Team

This post on " Is Your Mutual Fund Portfolio Based On Your Risk Profile? " appeared first on "PersonalFN"

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How can you create a mutual fund portfolio

A planned mutual fund portfolio is the backbone of a well-thought financial product. Based on specific needs, risk tolerance, and investment horizon, you can build a diversified mutual fund portfolio to suit your specific needs.

Select reputed fund houses 

Category of Funds

Expense ratios

Read fund documents

Invest regularly

Rupee cost averaging

To get the optimum benefits of mutual fund we need to create a strong, well planned and informed mutual fund portfolio.

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Things to know: Why You need to Change the SIP Amount

Increased Earnings

Lower Income

Changing Financial Goals

Market Fluctuations

Read blog here: Check the reasons and find when you can change your SIP Amount.

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𝐏𝐥𝐚𝐧𝐧𝐢𝐧𝐠 𝐟𝐨𝐫 𝐫𝐞𝐭𝐢𝐫𝐞𝐦𝐞𝐧𝐭 𝐰𝐢𝐭𝐡 𝐚 𝐦𝐮𝐭𝐮𝐚𝐥 𝐟𝐮𝐧𝐝?

Planning for retirement with mutual funds offers growth, stability, and professional management. By choosing the right funds, starting early, and diversifying, you can build a strong portfolio that ensures financial security in your golden years. Regular reviews, tax-efficient strategies, and expert guidance are key to optimizing your retirement plan.

Follow the step-by-step guide:

1️⃣ 𝐀𝐬𝐬𝐞𝐬𝐬 𝐘𝐨𝐮𝐫 𝐑𝐞𝐭𝐢𝐫𝐞𝐦𝐞𝐧𝐭 𝐍𝐞𝐞𝐝𝐬: Calculate your desired corpus and understand your risk tolerance to match funds to your goals. 2️⃣ 𝐂𝐡𝐨𝐨𝐬𝐞 𝐭𝐡𝐞 𝐑𝐢𝐠𝐡𝐭 𝐌𝐮𝐭𝐮𝐚𝐥 𝐅𝐮𝐧𝐝𝐬: Based on your risk profile and time horizon, you can choose equity, debt, or hybrid funds. 3️⃣ 𝐒𝐭𝐚𝐫𝐭 𝐄𝐚𝐫𝐥𝐲 & 𝐈𝐧𝐯𝐞𝐬𝐭 𝐑𝐞𝐠𝐮𝐥𝐚𝐫𝐥𝐲: Take advantage of compounding with SIPs and benefit from rupee cost averaging. 4️⃣ 𝐃𝐢𝐯𝐞𝐫𝐬𝐢𝐟𝐲 𝐘𝐨𝐮𝐫 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨: Spread your investments across asset classes and rebalance periodically. 5️⃣ 𝐌𝐚𝐱𝐢𝐦𝐢𝐳𝐞 𝐓𝐚𝐱 𝐄𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐜𝐲: Invest in ELSS funds and consult an advisor to optimize tax strategies. 6️⃣ 𝐑𝐞𝐯𝐢𝐞𝐰 & 𝐑𝐞𝐛𝐚𝐥𝐚𝐧𝐜𝐞: Regularly track performance and adjust as needed.

💡 Advanced Tips: For a comprehensive plan, use retirement tools, consider annuities, and factor in long-term care costs.

Investing in mutual funds offers growth potential, diversification, and professional management — crucial for a stable retirement. Start today for a secure tomorrow! 💼📈

👉 𝐑𝐞𝐚𝐝 𝐭𝐡𝐞 𝐟𝐮𝐥𝐥 𝐛𝐥𝐨𝐠 𝐡𝐞𝐫𝐞: Plan for your Retirement with Mutual Funds

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How to Invest in Mutual Funds:

Select a Mutual Fund: Select a scheme for your mutual fund in accordance with the objectives of investing and your risk-taking capacity. Past performance, expense ratio, and experience of the fund manager are also relevant considerations.

Amount to be Invested: Decide on the amount that you can spare to invest.

Investment Periodicity: Decide how long you want to invest. You can choose a monthly investment, quarterly, or yearly. 

Establish an Automatic Payment: You can establish an automatic payment from your bank account to your mutual fund account.

To get detailed information, you can visit us at below link where you can find the best advantages of investment in mutual fund.

Benefits of investing in Mutual Funds

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Advantages of Mutual Funds Investment

Mutual funds provide numerous benefits to all which attracts many people towards this type of investment:

Professional Investment Management Mutual funds are managed by experienced professionals who have the necessary skills, knowledge, and expertise to select, buy, and sell securities. They closely monitor market conditions and economic factors to make informed investment decisions.

Active or Passive Management Investors have the flexibility to choose between actively managed funds, where portfolio managers strive to outperform the market through active trading, and passively managed funds (like index funds), which aim to replicate the performance of a specific market index by tracking it closely.

Easy Redemption Mutual fund investments offer high liquidity, allowing investors to redeem their shares and access funds easily, when needed, providing flexibility in managing cash flow.

Periodic Disclosures Mutual fund schemes are heavily regulated, ensuring transparency. Fund houses are required to regularly disclose their investments, performance, and expense ratios, helping investors make informed decisions.

Investor Protection Regulatory bodies, such as the Securities and Exchange Board of India (SEBI), ensure that investors' interests are safeguarded, providing a level of protection against malpractices and fraud in the market.

For more information: Benefits of mutual fund investment

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𝐇𝐨𝐰 𝐭𝐨 𝐁𝐮𝐢𝐥𝐝 𝐭𝐡𝐞 𝐁𝐞𝐬𝐭 𝐚𝐧𝐝 𝐇𝐞𝐚𝐥𝐭𝐡𝐲 𝐌𝐮𝐭𝐮𝐚𝐥 𝐅𝐮𝐧𝐝 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨?

A well-structured diversified mutual fund portfolio is the best mutual fund portfolio one can build according to their financial needs.

Fundamental Concepts to Remember When Creating Your Mutual Fund Portfolio are Risk Tolerance, Building a Diversified Portfolio, Rupee Cost Averaging, Disciplined Investing, Long-Term Perspective, Portfolio Review and Rebalancing and Seeking Professional Consultation.

𝐓𝐡𝐞 𝐁𝐞𝐬𝐭 𝐌𝐮𝐭𝐮𝐚𝐥 𝐅𝐮𝐧𝐝 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐡𝐚𝐯𝐞:

𝐃𝐢𝐯𝐞𝐫𝐬𝐢𝐟𝐢𝐜𝐚𝐭𝐢𝐨𝐧: By investing in a diverse range of securities, mutual funds spread risk across various assets.

𝐋𝐢𝐪𝐮𝐢𝐝𝐢𝐭𝐲: Most mutual funds offer flexible redemption options, allowing you to access your investments when needed.

𝐏𝐨𝐭𝐞𝐧𝐭𝐢𝐚𝐥 𝐟𝐨𝐫 𝐇𝐢𝐠𝐡 𝐑𝐞𝐭𝐮𝐫𝐧𝐬: Well-managed mutual funds have the potential to deliver significant long-term returns.

𝐄𝐚𝐬𝐲 𝐑𝐞𝐝𝐞𝐦𝐩𝐭𝐢𝐨𝐧: Most mutual funds offer flexible redemption options, allowing you to access your investments when needed.

𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫 𝐏𝐫𝐨𝐭𝐞𝐜𝐭𝐢𝐨𝐧: Regulatory oversight ensures that investor interests are protected and prevents fraudulent activities.

𝐖𝐞𝐚𝐥𝐭𝐡 𝐂𝐫𝐞𝐚𝐭𝐢𝐨𝐧: Historically, equity mutual funds have the potential to generate higher returns over the long term, making them suitable for wealth creation.

For more information, please visit at:

How to build Mutual Funds Portfolio

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स्वतःचा गुंतवणूक पोर्टफोलिओ कसा तयार करावा? पूर्ण माहिती,जोखीम,ऑलोकेशन, ...

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How To Build Your Own Investment Portfolio? Factors, Risk, Allocation, S...

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Why You Need To Get Your Mutual Fund Portfolio Reviewed Right Now!

Regular health check-ups are crucial to your well-being. And though most people are reluctant at first, a check-up is extremely important because regular medical tests can help identify problems before they start.

Similarly, regular check-up of your financial health via a portfolio review is just as important to your financial well-being.

Reviewing your portfolio is even more important when mutual fund houses make changes in the fundamental attributes or the investment objective of the scheme.

This is pertinent, especially now, as fund houses are altering scheme names and categories to comply with the circular on Categorisation & Rationalisation of Mutual Fund Schemes issued by the regulator.

The Securities and Exchange Board of India (SEBI) defined 36 categories for mutual funds, with 10 categories for equity-oriented schemes and 16 categories under debt-oriented schemes. The remaining 10 scheme categories cover hybrid and solution-oriented schemes.

Following this, mutual fund houses in India are re-categorizing their mutual fund schemes, while some with fewer schemes have already done it.

Schemes are classified as per the average maturity of their holdings, the portfolio quality, and underlying security type.

PersonalFN is closely tracking the developments and have published all you need to know about the changes in mutual fund categorization here - Your Mutual Fund Scheme Renamed. All You Need To Know.

The guide also provides the list of schemes of 22 fund houses that have undergone or plan to effect a name change, a categorisation change and/or merger. We will update the list as and when more fund houses make public their scheme changes.

You can view the entire list here - Mutual Fund Scheme Name & Category Changes Announced.

The regulator has done its best to ensure that fund managers follow standard guidelines while creating portfolios. Hence, some changes in attributes may not match your initial investment objective and expectations that you had while investing in the scheme.

Given these changes, here are the top reasons you need to review your mutual fund portfolio right now!

1. A change in asset allocation

Due to a re-categorisation or merger of a scheme, there could be a change in the asset allocation as well. In the case of balanced funds, the equity investment is now restricted to 60%.

A re-categorisation to sub-asset classes too, will warrant a relook. Under equity schemes, a re-categorisation from multi-cap to mid-cap, as in the case of Reliance Growth, influences the overall asset allocation of your goals.

For example, as per your investment goals, you have invested 30% each in large-cap, multi-cap and mid-cap funds, and the remaining 10% in a balanced fund. Now if the multi-cap fund will henceforth be a mid-cap fund, it would mean about 60% of your portfolio is now invested in mid-caps. This is contrary to your investment plan. Hence, there is a need to alter your investment strategy.

2. A change in risk

A change in the investment pattern, as in the point above, will also alter the risk profile of the scheme. For a balanced scheme with a lower equity allocation, the volatility in returns will now be lower. Similarly, if the equity allocation of a hybrid scheme increases or if the scheme moves from a large-cap to large-and mid-cap or a multi-cap to mid-cap, the risk or volatility of the scheme will increase.

As an investor, you need to understand your tolerance to risk. This boils down to the suitability of the new scheme to your risk profile and investment goals. If the fund management is competent and you do not mind the additional risk, you may continue to hold on to the scheme. However, if you are risk-averse, you will need to look for other alternatives.

3. A change in expected returns

When planning towards financial goals, how much you need to save and invest depends on certain return projections. If you plan to invest in high-risk mid-cap funds, you will have a higher return expectation of say 14%-15% over the long term. However, if you invest in large-caps, your growth rate considered will be lower at around 10%-12%. The difference may look like a few percentage points, but when compounded over the long term, it makes a huge difference.

Here again, if a scheme's fund management is good, and you do not mind a change in asset allocation and risk, it will be necessary to review your portfolio to understand whether you are investing adequately as per the new investment attributes of the scheme.

4. A change in investment style

There are different investment styles and strategies that can alter the performance of a fund. If you have invested in an opportunities-styled fund, the basic objective of the scheme is to take advantage of the anomalies in certain set of sectors.

As per the new classification, Opportunities-style funds as a category do not exist. Currently, there are only Contra Funds, Value Funds, Dividend Yield Funds, and Focussed Funds that cover different investment styles.

Thus, a change in investment style can influence the performance of the fund, which can be both positive or negative. If your fund undergoes a change in investment style, asses how this would impact the performance.

However, if you are unsure and the fund management looks promising, hold on to your investment and review the performance of the scheme after six months.

5. A change in portfolio quality

Under debt schemes, there are as many as 16 categories. So a Corporate Bond Fund will now invest in the highest rated securities, while a Credit Risk Fund will primarily invest in instruments rated below AA+ or equivalent. As per the average maturity, we now have Short Duration Fund, Medium Duration Fund, Long Duration Fund, etc.

Given the number of categories, the reclassification of your debt scheme may result in a change in asset allocation and even the portfolio quality. Hence, you will need to review the impact of such changes in your fixed income portfolio.

Short-term pain, for long-term gains

(Source: https://unsplash.com)

The regulators new classification of mutual funds is giving a tough time to asset managers and some inconvenience to investors as well. However, the standardisation of mutual fund categories was much need.

While mutual fund scheme names such as contra funds were overhyped, others were purely misleading. In terms of investment style, some schemes practiced completely different. The scheme name was purely superficial.

We are glad that SEBI took a step to curb this practice.

It may be a little inconvenient for you, as an investor, but the pain will be short lived.

The new categorisation will make understanding mutual funds simpler. As the new rule states, every mutual fund to have only one scheme under each category, it will make it easier to pick the right fund under each category.

If you are confused about your mutual investment strategy due to these changes, do contact your mutual fund advisor or investment counsellor to help you decide on the holdings in your mutual fund portfolio.

P.S. – I strongly suggest that you avail of PersonalFN's Mutual Fund Portfolio Review service. PersonalFN's ethical and unbiased investment advisers will comprehensively review your mutual fund portfolio. Here you will get Buy / Sell / Hold recommendations on your existing portfolio, keeping in mind the five points discussed in this article. The portfolio will be revamped based on your requirement and risk profile. Don't delay your investment health checkup, opt for it now and avail of exclusive discounts. Subscribe Here.

Author: Jason Monteiro

This post on " Why You Need To Get Your Mutual Fund Portfolio Reviewed Right Now! " appeared first on "PersonalFN"

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Why You Need An All-Weather Mutual Fund Portfolio

Uncertainty is a part of living.

And the state of capital markets, globally, reeling under the threat of tariff wars and dynamic geo-political equations is proof enough.

In 2017, equity markets across the globe were firing on all cylinders.

Ubiquitously, markets took a U-turn when nobody anticipated them to.

And most times, during the phases of high optimism, mid caps and small caps tend to do exceedingly well. But when the tide turns, they get hammered.

The opposite is true for large caps though.

Some of the corporate giants—known as large caps or blue chips—are stable, and hence their return potential is relatively low as compared to mid-sized companies. And, thus they expose you to a lower risk too. Here, risk means the risk of losing your capital permanently.

In 2017, many mid and small cap companies and mutual funds with a mandate to invest in them performed splendidly—some even generated as much as 60%-80% returns.  

But their recent performance has been miserable. So far, some of them have lost as much as 15% in just 5½ months in 2018.

On the other hand, large cap funds, on an average, have generated stable returns of 32% in 2017 and contained their fall to about 2%.  

Don’t you dream to create a portfolio that gives you the safety of large caps with a return potential of midcaps?

[Read: Do You Fear The Decline In Mid Cap Funds? Don’t, If You Invest The Right Way!]

Well, that’s tough to achieve; risk and return go hand-in-hand. But making the most of market volatility is possible, although not easy.

Here’s the key!

(Image source: pixabay.com)

Create an all-weather portfolio for you using the ‘core and satellite’ strategy of investing.

You will get various definitions of core and satellite strategy.

This is how Investopedia defines it: Core-satellite investing is a method of portfolio construction designed to minimize costs, tax liability, and volatility while providing an opportunity to outperform the broad stock market as a whole. The core of the portfolio consists of passive investments that track major market indices, such as the Standard and Poor's 500 Index (S&P 500). Additional positions, known as satellites, are added to the portfolio in the form of actively managed investments.

According to Vanguard: The core-satellite approach to portfolio construction is a methodology used to combine actively managed funds with index funds in a single portfolio. The appeal of this approach is that it seeks to establish a risk-controlled portfolio while also securing some prospects of outperformance.

These definitions look perfect in the context of developed markets where market conditions are more efficient, i.e. where the impact of news is immediately reflected in the stock prices.

At PersonalFN we formulated the core and satellite strategy for mutual funds investing and defined it differently, making it relevant for Indian investors.

According to us, the term “core” applies to the more stable, long-term holdings of the portfolio; while the term “satellite” applies to the strategic portion that would help push up the overall returns of the portfolio, across market conditions.

PersonalFN believes, if you apply this approach to invest in equity oriented mutual funds, you can get the best of both worlds, that is, short-term high-rewarding opportunities and long-term steady-return investing, and the good thing is, it works!

Below are the benefits of following the core and satellite approach:

Facilitates optimal diversification;

Reduces the risk to your portfolio;

Enables you to benefit from a variety of investment strategies;

Aims to create wealth, cushioning the downside;

Offers the potential to outperform the market; and

Reduces the need for constant churning

The ‘Core and satellite’ investing is a time-tested strategic way to structure and/or restructure your investment portfolio.

As far as your mutual fund investments are concerned, the ‘core portfolio’ should consist of large-cap, multi-cap, and value-style funds, while the ‘satellite portfolio’ should include funds from the mid-and-small cap category and opportunities funds.

PersonalFN’s research states that 60% of the portfolio should be reserved for Core mutual funds and the balance 40%, for the Satellite mutual funds.

But what matters the most is the art of cleverly structuring the portfolio by assigning weights to each category of mutual funds and the schemes picked for the portfolio.

Moreover, with changes in market outlook, the allocation to each of the schemes, especially in the satellite portfolio, needs to change.

[Read: Why You Should Strategically Structure Your Mutual Fund Portfolio]

Please remember…

Constructing a portfolio with a stable core of long-term investments, balanced by a periphery of more short-term, satellite holdings can help tactically allocate the investible surplus and offer the potential to outperform the markets.

In this way, the satellite portfolio supports the core by taking active calls based on extensive research.

Now let’s look at what goes into creating a strategic portfolio -

The selected funds should be amongst the top scorers in their respective categories. The portfolio should be built with a time horizon of at least 5 years

It should be diversified across investment style and fund management

Each fund should be true to its investment style and mandate

They should be managed by experienced and competent fund managers and belong to fund houses that have well-defined investment systems and processes in place

Each fund should have seen at least three market cycles of outperformance

The portfolio should contain an adequate number of schemes in the right proportion. In short, it should carry the most optimum allocation to each scheme and investment style

The number of funds in the portfolio should not exceed six or seven

No two schemes should be managed by the same fund manager

Not more than two schemes from the same fund house should be included in the portfolio

Are you wondering how difficult it would be for you to select mutual fund schemes from various categories?

PersonalFN offers you a great opportunity, if you’re looking for “high investment gains at relatively moderate risk”. Based on the ‘core and satellite’ approach to investing, here’s PersonalFN’s premium report: The Strategic Funds Portfolio For 2025 (2018 Edition).

In this report, PersonalFN will provide you with a readymade portfolio of its top equity mutual funds schemes for 2025 that have the ability to generate lucrative returns over the long term.

PersonalFN’s “The Strategic Funds Portfolio for 2025” is geared to potentially multiply your wealth in the years to come. Subscribe now!

Happy Investing!

Author: PersonalFN Content & Research Team

This post on " Why You Need An All-Weather Mutual Fund Portfolio " appeared first on "PersonalFN"

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Is Over Diversification Good For Your Mutual Fund Portfolio? Know Here

My friends and I have been planning a trip to Goa, but it still is a castle in the air. Whenever we are close to finalizing it, something comes up and postpones our adventure.

One friend wants a luxurious trip, while the other one wants a budget trip. Two of them would like to take this trip in December and the others, in May. With such a contrast of opinions, consensus is nearly impossible.

Remember, “Too many cooks spoil the broth”. This old proverb holds true even today.

Same goes with your investments too.

One of the basics of investing is diversification.  

And over diversification of your portfolio is unhealthy for wealth creation.

Let me tell you diversification of your portfolio across the asset classes and instruments is very important.

But diversifying in multiple schemes having a similar style and objective is definitely a mistake!

Investors look for the “best funds", “top funds”, “best performers”, and so on to make good returns.

As soon as someone knows I am research analyst, the first thing I am asked is, “Which is the best fund according to you”.

Or, “I recently invested Rs 1 lakh in XYZ mutual fund; do you think it is good?”

And then, it gets hard to explain to them this is not how you make smart, prudent investment decisions.

Also, not to mention the constant churning that followed, with one fund moving out and another entering in. This hectic pace of activity leaves investors with tons of schemes, most of them looking the same.

So what style of diversification is ok?

Diversify your risk across investment styles

While building a mutual fund portfolio, most investors do forget their basic objective of investing in mutual funds, i.e. long term wealth creation.

Begin with identifying your risk appetite as well as investment time horizon. Then accordingly, allocate your portfolio across asset classes and investment styles that will help you diversify your risk across market cycles and meet your long term goals.

Considering the investment universe and the investment styles followed by mutual funds, we have identified various category of mutual funds like diversified equity mutual funds focusing on various market caps (large cap, predominant large cap, mid cap, mid-small and micro cap, flexi cap) and styles (opportunities, value) also specialty funds like index, ELSS, or thematic funds focusing on specified sectors.

Other categories of funds are Aggressive Hybrid Funds, Conservative Hybrid, Balanced Advantage, Multi-asset allocation, Arbitrage, Equity savings. Under debt category - Income, Liquid, Floating, Gilt, Ultra Short-Term Funds, Money Market Funds, Corporate Bond Funds and so on.

You need not hold 5-10 schemes from each category; only 1 or 2 consistent schemes will facilitate long-term wealth creation.

Holding too many funds with a similar objective is a bad idea With too much diversification, you may overlook the risks and expenses. At times you may even do so to earn better returns.

For instance, many investors keep on adding star performers to their portfolio thinking that it will earn them extra returns. And while doing so they do not check the fund’s objective.

Investors forget that after every boom, there is a gloom; and these stars lose their shine.

Do remember that during a mid cap rally, all mid cap funds top the list and star rankings. Right after the downfall, these lag behind on the list and star rankings.

Moreover, you may not be lucky enough to add mid cap funds before the rally starts. You may have become heavy weight on them only when the mid cap rally is almost reaching exhaustion points. And then volatility starts knocking the doors of your portfolio.

This increases the risk of your portfolio, as the major portion of your portfolio constitutes of mid cap funds.

Remember, while mutual funds are attractive investments because of the exposure to a number of stocks in a single investment vehicle, holding too much of similar objective funds can be a bad idea.

Many investors have the erroneous view that risk is proportionately reduced with each additional scheme in their portfolio. Remember, you can only reduce your risk to a certain point after which there is no further benefit from diversification. Moreover, as the fund managers might be investing in same stocks or sectors, overlapping same underlying investments is possible. With multiple schemes having overlapping objective and investment style, you tend to increase the overall risk to your portfolio.

Once the underlying stocks or sectors start witnessing a dive, your over-diversification would not do any good to your portfolio.

Please note that every additional fund in your portfolio may add to the cost in terms of high expense ratio and multiple transaction cost.

And any bad pick in your portfolio can affect the performance of your overall portfolio.

As a result, there will be an increase in expenses, but a compromise on portfolio performance.

Don’t forget the time which you would spend monitoring the large number of mutual fund schemes and thus the paperwork involved, will be futile.

So, how many schemes should one hold?

Although there are number of mutual funds providing thousands of schemes to invest in, truly speaking, there is no magical number that is right which can help you build an optimal portfolio.

Just remember, you don’t need to have a dozen of schemes in your portfolio to diversify your risk. Even a single diversified equity fund can diversify your risk in “n” number of stocks or multiple sectors. Only thing is, they may not include the other styles on offer.

The magic lies in choosing the right fund (maximum 1 or 2 of each style) with a well established track record. Basically, the funds which stick to their investment mandate and are consistent performers.

Funds which are suitable for you as per your risk appetite and time horizon which help you meet your long term goals.

If you desire to build an ideal portfolio of mutual funds, here are some important points:

Primarily, look at holding funds that have different characteristics and behave differently

Try to limit the number of funds in your portfolio and feel comfortable with your holdings

Consider your investment objectives and goals.

If generating regular income is your primary goal, then mid cap or sector fund may not be suitable to your portfolio; while if your objective is capital preservation, equity funds will not suit you.

Portfolio rebalancing is the key

The higher number of schemes you hold – more complicated your portfolio becomes.

Often people don’t know what to do with their mutual fund portfolio and how to rebalance them. Simply because they are unsure of what their actual holdings represent.

Hence, consider this:

If you hold an existing portfolio, then it is advisable to study and compare the category and the underlying investments in your portfolio.

If you find significant overlapping of similar stocks or sectors, then it makes sense to eliminate some of those funds from your portfolio.

If any of the funds do not match your investment goals or have a similar mandate (say 3-4 large cap funds and 2-3 mid cap funds), it makes sense to exit and invest in a single fund having a more consistent track record in their respective category.

Having a well-diversified portfolio is good but having it in the right quantity is more important. So, periodically review and rebalance your portfolio to eliminate overlapping and create wealth in the long term.

You need to take charge of your investments and avoid over diversification.

Remember, “Too much of anything is good for nothing!”

If you are confused about the health of your mutual portfolio, the investment strategy, your own risk profile, and your asset allocation; do contact your investment adviser or investment counsellor to help you.

PersonalFN can get you best results powered by its ethical and unbiased investment advisers who will comprehensively review your mutual fund portfolio.

Opt for PersonalFN's Mutual Fund Portfolio Review service to check how healthy your portfolio is and get Buy / Sell / Hold recommendations on your existing portfolio, keeping in mind your investment objectives and financial goals. Act now!

Share your queries and thoughts with us via email at info@personalfn.com.

Happy Investing!

Rajani Vyas

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Why You Need An All-Weather Mutual Fund Portfolio

Uncertainty is a part of living.

And the state of capital markets, globally, reeling under the threat of tariff wars and dynamic geo-political equations is proof enough.

In 2017, equity markets across the globe were firing on all cylinders.

Ubiquitously, markets took a U-turn when nobody anticipated them to.

And most times, during the phases of high optimism, mid caps and small caps tend to do exceedingly well. But when the tide turns, they get hammered.

The opposite is true for large caps though.

Some of the corporate giants—known as large caps or blue chips—are stable, and hence their return potential is relatively low as compared to mid-sized companies. And, thus they expose you to a lower risk too. Here, risk means the risk of losing your capital permanently.

In 2017, many mid and small cap companies and mutual funds with a mandate to invest in them performed splendidly—some even generated as much as 60%-80% returns.  

But their recent performance has been miserable. So far, some of them have lost as much as 15% in just 5½ months in 2018.

On the other hand, large cap funds, on an average, have generated stable returns of 32% in 2017 and contained their fall to about 2%.  

Don’t you dream to create a portfolio that gives you the safety of large caps with a return potential of midcaps?

[Read: Do You Fear The Decline In Mid Cap Funds? Don’t, If You Invest The Right Way!]

Well, that’s tough to achieve; risk and return go hand-in-hand. But making the most of market volatility is possible, although not easy.

Here’s the key!

(Image source: pixabay.com)

Create an all-weather portfolio for you using the ‘core and satellite’ strategy of investing.

You will get various definitions of core and satellite strategy.

This is how Investopedia defines it: Core-satellite investing is a method of portfolio construction designed to minimize costs, tax liability, and volatility while providing an opportunity to outperform the broad stock market as a whole. The core of the portfolio consists of passive investments that track major market indices, such as the Standard and Poor's 500 Index (S&P 500). Additional positions, known as satellites, are added to the portfolio in the form of actively managed investments.

According to Vanguard: The core-satellite approach to portfolio construction is a methodology used to combine actively managed funds with index funds in a single portfolio. The appeal of this approach is that it seeks to establish a risk-controlled portfolio while also securing some prospects of outperformance.

These definitions look perfect in the context of developed markets where market conditions are more efficient, i.e. where the impact of news is immediately reflected in the stock prices.

At PersonalFN we formulated the core and satellite strategy for mutual funds investing and defined it differently, making it relevant for Indian investors.

According to us, the term “core” applies to the more stable, long-term holdings of the portfolio; while the term “satellite” applies to the strategic portion that would help push up the overall returns of the portfolio, across market conditions.

PersonalFN believes, if you apply this approach to invest in equity oriented mutual funds, you can get the best of both worlds, that is, short-term high-rewarding opportunities and long-term steady-return investing, and the good thing is, it works!

Below are the benefits of following the core and satellite approach:

Facilitates optimal diversification;

Reduces the risk to your portfolio;

Enables you to benefit from a variety of investment strategies;

Aims to create wealth, cushioning the downside;

Offers the potential to outperform the market; and

Reduces the need for constant churning

The ‘Core and satellite’ investing is a time-tested strategic way to structure and/or restructure your investment portfolio.

As far as your mutual fund investments are concerned, the ‘core portfolio’ should consist of large-cap, multi-cap, and value-style funds, while the ‘satellite portfolio’ should include funds from the mid-and-small cap category and opportunities funds.

PersonalFN’s research states that 60% of the portfolio should be reserved for Core mutual funds and the balance 40%, for the Satellite mutual funds.

But what matters the most is the art of cleverly structuring the portfolio by assigning weights to each category of mutual funds and the schemes picked for the portfolio.

Moreover, with changes in market outlook, the allocation to each of the schemes, especially in the satellite portfolio, needs to change.

[Read: Why You Should Strategically Structure Your Mutual Fund Portfolio]

Please remember…

Constructing a portfolio with a stable core of long-term investments, balanced by a periphery of more short-term, satellite holdings can help tactically allocate the investible surplus and offer the potential to outperform the markets.

In this way, the satellite portfolio supports the core by taking active calls based on extensive research.

Now let’s look at what goes into creating a strategic portfolio -

The selected funds should be amongst the top scorers in their respective categories. The portfolio should be built with a time horizon of at least 5 years

It should be diversified across investment style and fund management

Each fund should be true to its investment style and mandate

They should be managed by experienced and competent fund managers and belong to fund houses that have well-defined investment systems and processes in place

Each fund should have seen at least three market cycles of outperformance

The portfolio should contain an adequate number of schemes in the right proportion. In short, it should carry the most optimum allocation to each scheme and investment style

The number of funds in the portfolio should not exceed six or seven

No two schemes should be managed by the same fund manager

Not more than two schemes from the same fund house should be included in the portfolio

Are you wondering how difficult it would be for you to select mutual fund schemes from various categories?

PersonalFN offers you a great opportunity, if you’re looking for “high investment gains at relatively moderate risk”. Based on the ‘core and satellite’ approach to investing, here’s PersonalFN’s premium report: The Strategic Funds Portfolio For 2025 (2018 Edition).

In this report, PersonalFN will provide you with a readymade portfolio of its top equity mutual funds schemes for 2025 that have the ability to generate lucrative returns over the long term.

PersonalFN’s “The Strategic Funds Portfolio for 2025” is geared to potentially multiply your wealth in the years to come. Subscribe now!

Happy Investing!

Author: PersonalFN Content & Research Team

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