How to build a fund portfolio?
Questions to ask yourself : The fund that you decide to invest in should be determined by your investment horizon, risk appetite, cash flow requirements and tax considerations.
Take this short quiz to find out whihc option is the best for you. depending on the risk level of the fund and the returns it can generate.
Tenure : How long do i want to stay invested?
- Short term: Debt
- medium Term ; Balanced, FMPs
- Long Term: Equity
Each financial goal has a different tenure, so invest in funds that are likely to give the best results in the horizon for each goal.
Liquidity: Would I need money at short notice?
- If Yes: Liquid Fund
- If No: Other debt and equity funds
Your monthly surplus has two parts: ready to use cash and investible money. Choose funds that meet your cash flow needs.
Asset Allocation: How do I want to split my investment?
- Heavy in equity: Diversified, ELSS, Mid and Small cap, Sectoral
- Heavy in Debt: Debt, FMPs
- Mix of Both: Balanced, MIPs
Choose the fund that invest in assets that suit your desired asset allocation.
Taxability : Which tax breaks do I want?
- Low tax: debt for over one year
- No tax: Equity, equity-oriented balanced funds for one year
- Tax exemption at the time of investment and at maturity: ELSS
The tax levied on maturity depends on the kind of fund and your investment tenure. Choose the funds that are the most tax-efficient.