How to Choose the Right Mutual Funds for Your Portfolio| North Loop Official Blog
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28 Mar 2020

How to Choose the Right Mutual Funds for Your Portfolio

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How to choose the right mutual funds for your portfolio

Now that you’ve set up your mutual fund account, it’s time to choose which funds to invest in! But how do you choose the right mutual funds for your portfolio? We’ll look at some strategies here (speak to a North Loop advisor to help you as well!)

Your Financial Goals

The first step in choosing the right mutual funds for your portfolio is figuring out your financial goals:
  • How much are you looking to invest?
  • What are you investing for? Are you investing for a long term goal or a short term goal?
  • How much risk do you want your portfolio to have?
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Picking Mutual Fund Categories

Once you know your goals, you can work backwards from there to start choosing broader themes and categories to invest in, and then picking mutual funds within those categories. Here are a few popular categories:
Multi Cap Mutual Funds
These funds are a great way to start, as they are invested in a variety of equities across industries, giving your portfolio a fair amount of diversification.

Tax Saving ELSS Funds
Since you can get up to Rs. 1,50,000 as tax exemption by investing in ELSS funds, these are a great starter fund as well.

Balanced Funds
A great way to start diversifying your portfolio across equities and debt, as balanced funds invest in both.

Ultra Short Term Debt Funds
Ideal if you’re planning a short-term financial goal as these funds are perfect for investing up to a year. Also recommended if you need your money to earn returns while you figure out your investing strategy!

Value Mutual Funds
These funds seek out ‘value’ funds that they believe are priced cheaply and can provide good returns in the long term - a good way to build out your long-term investing portfolio.

Short Term Debt Funds
Similar to ultra short term debt funds, but with a slightly longer time horizon (1-3 years). Similar to those funds, use these funds for short-medium term goals, as they are lower in risk than equities.

Picking Mutual Funds

Now that you’ve decided on your portfolio mix, it's time to pick mutual funds for each category. Don’t spend too much time worrying about which mutual fund to pick by return, but use these important factors instead:
  • Return and risk of the mutual fund: See the risk adjusted return for the mutual fund. A high return fund may have higher risk than a medium return fund with medium risk.
  • Track record of the mutual fund: How long has the fund been around and how consistent has been its performance.
  • Fees of the mutual fund: What is the exit load/withdrawal fee of the fund, as well as the expense ratio for the fund?

Diversification of Your Portfolio

Remember to diversify your portfolio. If you’re investing equally across three funds, make sure the funds are in different sectors, mixes of debt and equity and so on.

Keep Monitoring Your Portfolio

Keep checking your portfolio’s performance every month to see if you need to re-balance it!

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.