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Choosing Mutual Funds for Your Portfolio
24 Jul 2023

Though mutual funds are widely touted to be one of the easiest ways to invest in the market, you should always exercise caution when investing in them. Prior to investing, it's critical to conduct your homework and comprehend the risks involved. To determine how much your investment will be valued in actual terms in the future, You can use inflation calculator to assess whether you are taking on too much danger. Not all funds may be the ideal options for you. Thankfully, crafting your very own mutual funds portfolio is not very hard. By following a few simple steps and by taking a few factors into account, you can quickly come up with a portfolio of funds designed to create wealth for you over the long term. Continue reading to find out how you can go about this. 

How to Choose Mutual Funds for Your Portfolio?

There are quite a few parameters that you will have to consider and analyze before you can add a mutual fund to your investment portfolio.  The fund's investment objective, risk profile, expense ratio, and performance history are a few factors you should take into account. You can evaluate your prospective returns and compare various funds with the aid of a mutual fund calculator. In this article, we’re going to be taking a look at a few of the most important ones. 

1. Your Investment Goals

The first factor that you should consider when choosing a mutual fund is your investment goal. For instance, you might be planning for your retirement or maybe for a small family vacation. No matter what your goals are, always choose a mutual fund that aligns with it. 

2. Your Risk Profile

Your mutual funds portfolio should accurately reflect your risk profile. For instance, if you’re a conservative investor with low risk tolerance, you may look to invest in debt funds. On the other hand, if you’re a more aggressive investor with high risk tolerance, equity funds may be more suitable for you. And if you’re somewhere in the middle with a moderate risk tolerance, you could look towards hybrid funds. Once you have decided on the type of mutual fund that you want to invest in, you can use a CAGR calculator to estimate the potential returns of your investment. This will help you determine how much money you can expect to earn over time, given your risk tolerance and investment goals.

3. Your Investment Strategy

Every mutual fund has an investment strategy, which is usually dictated by the fund house and the fund manager. The mutual funds that you choose for your portfolio should ideally be governed by a strategy that matches your investment philosophy. For instance, if your investment philosophy is to only invest in blue-chip companies, you should look to invest in a fund that invests in blue-chip companies. 

4. Mutual Fund Performance History

Performance metrics are another major factor that you should always analyze before investing in mutual funds. Sifting through the past performance of a fund gives your valuable data on how it performed during volatile times. That said, keep in mind that the past performance of a fund is not a guarantee of future performance. 

5. Expense Ratio and Loads 

Fund houses tend to levy various fees and charges on their mutual funds. This includes the expense ratio, which is a charge that’s levied for managing the funds. Similarly, there’s also an entry and exit load on mutual funds as well. The entry load is a fee that’s charged at the time of investment, whereas the exit load is the charge that’s levied when withdrawing your investment from the fund. It is a good idea to choose a mutual fund with lower expenses, since it lowers the overall cost of your mutual fund ownership. 


By taking into account the above-mentioned factors, you can construct a mutual funds portfolio that’s ideal for you. That said, before you proceed to construct one, make sure to first open a demat account. With a demat account, you can also invest in upcoming IPOs in addition to mutual funds as well. Visit Motilal Oswal today to open a trading and demat account in your name for free through a completely online process. 

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