How to get the Right Mix of Mutual Funds?

Mr. Mahesh Patil, Birla Sun Life Asset Management Company

Here are a few questions to help readers identify the correct mix of mutual funds (MFS) to have in their investment portfolio:

*  By when do I want to get there?

Now assign a timeline to each goal so you are clear about the time required to reach it. This action has an important bearing on the type of fund to choose, as equity funds are best for long-term goals (10+ years), hybrid funds for mediumterm goals (four to eight years) and conservative fixed income funds for goals that fall within the next two to three years.

 

Mahesh Patil,
Co - Chief investment Officer,
Birla Sun Life
Asset Management Company

 Where am I? Where do I want to reach?

As you start planning your finances, it is very important that you take stock of your current portfolio and asset mix.

Think back ­ what instruments are you at present investing in?

What is the proportion of your existing investments between equity, fixed income and gold?

Then, note down your key financial goals and target value of each goal. Your goal can be ­ buying your dream home, saving for a new car, saving for your child's higher education or even marriage expenses.

 What is my goal amount?

Take target value of each goal and increase it by a reasonable inflation rate to arrive at the amount you will require to successfully fulfill your goal.

For example, if you are saving for a car that costs about Rs. 5 lakh today, with a horizon of three years, assuming 5% inflation in car prices, you should target having about Rs. 5.79 lakh at the end of 3 years.

Last but not the least -it is very important to choose a dependable investment partner! After you are clear on the type of funds you need to invest in, look at the track record of the funds in that category.

Choose funds that have a long-term record of consistent performance. If required, use the services of an investment adviser, who can help you plan your investments to meet your financial goals.

About the author

Mr. Mahesh Patil, Co - Chief investment Officer, Birla Sun Life Asset Management Company

Mr. Mahesh has over 20 years of experience in fund management, equity research and corporate finance. Prior to joining BSLAMC, he has worked with Reliance Infocom Ltd. in Business Strategy.

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