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!)
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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.
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.
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.