5 Mutual Fund Features To Help You Build A Robust Investment Portfolio

It has been a blockbuster performance of equity mutual funds in 2020-21. The return generated by most equity mutual fund schemes in the last 12-months has been nothing short of a spectacular performance.

Over the last one-year period, the returns across equity fund categories have been in the range of 50 per cent to over 100 per cent. Expecting such similar returns in the future is not the right thing but one thing that clearly comes out is the power of equities and the long-term potential of equity to deliver a higher inflation-adjusted return. Effectively, one good year of performance has shored up the performance over a longer time frame of 3-5-10-years as well. The average return over a longer period has now come within the range of 12 per cent which most equity mutual fund investors look forward to.

With high returns comes high volatility and risks. While the return from the equity asset class has the potential to beat returns of other asset classes in the long term, there are various risk factors at play. The risk-reward ratio in the case of equity-oriented investments such as equity mutual funds and direct stocks is high. This means, for high returns, there is an element of high risk as well. Therefore, it is always better to hold a well-diversified equity MF portfolio. Higher exposure to large-cap schemes and some exposure to midcap and small-cap funds can be one approach to utilize the potential of equities in the long run.

Here are a few key things that may help you build a more robust MF portfolio for the long-term goals.

01.SIP or Lumpsum

If the goal is long-term, invest the investible surplus that you have. Trying to time the market may not be fruitful in the long run. For salaried employees, a regular saving plan helps as one may need to invest each month through the systematic investment plan (SIP).