Here’s what to do if you can’t manage your mutual funds portfolio

Disclaimer: This story is for informational purposes only and should not be taken as investment advice.

Many investors out there may take up the initiative of starting an investment plan but lose track of it either due to their career or some other reason. Not many of us will be able to consult with financial planners for this and so planning for future goals becomes difficult.

Similar queries were addressed in a special episode of Zee Business Money Guru where majority of the callers were from the Indian army and were looking to grow their investments. However, these queries become applicable to investors at large as well.

“Army and navy personnel need to keep a few points in mind before investing in markets. Point one is that these officers are provided houses and other perks that come with the job. However, on retirement they will need to move into rental apartments or their own houses,” said Feroze Azeez, Anand Rathi, online stock trading and advisory.

This financial goal needs to be kept in mind to avoid future inconveniences.

“Point two depends on strategy of investment. Most of your portfolio should be in equity markets because it gives better returns. Savings got on retiring like provident fund are mostly in debt. So you should keep your personal portfolio in equity,” Azeez added.   

Investing in debt funds can be said to be ideal investments for conservative investors. They provide investments in fixed income securities issued by the government and companies. And provide interest rates in line with fixed deposits.

Debt funds can become tax efficient if the holding period is more than three years.

“The RBI will lend money to commercial banks at the repo rate. There are a lot of factors that result in the increase or decrease of interest rates, but the prevailing interest rates also determine the rate at which institutions issue bonds and other debt securities. The prices of fixed income securities are inversely proportional to interest rates. With an increase in interest rates, bond yields go down. And vice versa. This is why debt funds tend to earn higher returns when interest rates fall or are expected to fall, as the prices of bonds will go up,” a report by ClearTax on debt funds read.

Optimal portfolio

Past the debate on debt funds and equity funds the question arises for an ‘optimum’ or high yielding portfolio. For this purpose too many funds in the same portfolio can also become moot.

An investor call to Zee Business said he had placed his investments in nearly 20 funds which was not advisable.

“A mutual fund portfolio with six to seven funds is considered too much as it is. This is because a portfolio with 20 funds would be dealing with 400-500 shares, which is too much. The chances of gaining higher returns becomes less when you have ‘effectively’ bought the whole market,” Azeez said.

If you do want to invest to secure children’s education then thinking about long term investments becomes imperative.

“Five or six good, manager’s funds very different from each other should be bought. The performances of these funds will be good backed by handsome returns and risk being moderated,” Azeez concluded.

Also Read: 

• Here’s how much you need to invest to create a corpus of Rs 50 lakh
• All you need to know about the impact of credit cards on your home loan

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