How to Build a Mutual Fund Portfolio with ₹ 15,000

Are you curious about the best places to put your monthly investment of Rs. 15,000? Then this blog is just for you! One of the best ways to start building your wealth is by investing in Mutual Funds, and it's even better if you've already decided to put Rs. 15,000 into a Mutual Fund SIP each month. The longer the Mutual Fund SIP (Systematic Investment Plan), the more an investor can grow. The most crucial factor in mutual fund SIP is time.

One should make significant investments in SIP plans regardless of volatility, upward or downward trends, as returns will be calculated using an estimate of their Net Asset Value (NAV).

In this blog, we have provided a list of steps to build a Mutual Fund portfolio with Rs. 15,000 per month in SIP Mutual Funds. Thus, here's how to build an appropriate MF portfolio to ensure that your monthly investments work for you:

• STEP 1 – Map Your Investment Goals

It’s essential to have the portfolio aligned with your investment goals. The goals need not be as specific as buying a house or going on a world tour. It can be to create wealth in the long term or invest with high liquidity etc.

For building a perfect portfolio, consider the following –

• Investment Goals – What are you investing for?
• Risk – What is the amount of risk you are willing to take?
• Diversification – Is the portfolio diversified enough to reduce further risk?

• STEP 2 – Plan Out Your Financial Objectives

The best way to build a portfolio is to link your investments to your financial objectives. Your objectives may be short-term, such as booking a quick trip or cruise, buying a car, etc.

They could also be long-term investment objectives, such as accumulating wealth, protecting capital, reducing taxes, or saving for retirement. Once you are clear on your investment objectives, you can establish your portfolio to achieve your goals.

• STEP 3 – Examining Economic Factors

Is now the right time for you to start making investments in Mutual Funds? You must evaluate the macroeconomic factors affecting your country's financial markets. The portfolio is impacted by the economic variables that directly impact the financial markets on a national and international level, which influences the fund's performance.

The economy is impacted by various factors, including governmental decisions, industrial performance, and market performance. Therefore, to achieve good returns on your Mutual Fund portfolio, you should invest in Mutual Funds when the nation's economy is stable and expanding.

• STEP 4 – Recognize Your Investment Horizon & Level Of Risk Tolerance

Before deciding on your funds, you must first determine your investment horizon or the length of time for which you anticipate holding your investments. You should know your financial goals before you begin your investment journey. Your portfolio should contain investments that are appropriate for your short-term, your mid-term, and your long-term goals.

The following step is figuring out how much risk you can take. You must be completely honest with yourself when it comes to money. It can hurt later if you believe you can handle high levels of risk because you enjoy adventures.

• STEP 5 – Amount of Funds

It's not a good idea to include a huge and impulsive number of schemes in your portfolio when deciding the number of funds you should invest in. You, as an investor need to recognize that diversification only works when your portfolio comprises various fund categories.

A portfolio with various assets helps maintain the overall portfolio return through diversification. In addition, the stability of large caps can protect your investments if mid-caps experience a decline. Consequently, an ideal portfolio would contain three to five schemes with a range of market capitalizations and asset classes.

• STEP 6 – Choosing A Fund

The time has come to choose funds. Various Asset Management Companies (AMCs) may offer different returns for the same fund category. This depends on the businesses that the funds have invested in and the fund manager's level of knowledge.

Before actually investing in a fund, take the expense ratio into account. The cost incurred to manage the fund is represented by the expense ratio. In this case, the higher returns are available to you as an investor, the lesser the expense ratio. Due to compounding effects, the costs could eventually reach lakhs.

• STEP 7 – Levels of Performance

Any fund's future potential depends on how consistently it has produced returns in the past and how it has maintained its position at the top by outperforming its standards and industry cycles. Before drawing any conclusions about the consistency of the fund, one should look at its three- and five-year returns.

Mutual Funds for Investing Rs. 15,000 per month Using SIP

Unless you are highly knowledgeable about the markets and Mutual Funds, a good rule of thumb is to invest in the following Mutual Funds if you are a beginner and wish to start small, which is with merely ₹15,000 SIP per month.

1) Canara Robeco Equity Tax Saver Fund

Canara Robeco Equity Tax Saver Direct-Growth is an Equity Mutual Fund Scheme launched by Canara Robeco Mutual Fund. This scheme was made available to investors on 19 Dec 1987. The scheme seeks to achieve long-term capital appreciation by predominantly investing in equities.

It also offers tax benefits under Section 80C. The investments may be made in primary and secondary markets, and the scheme may also invest in overseas equity markets like ADRs/GDRs. This is one of the best schemes for investing in Mutual Funds for beginners.

2) ICICI Prudential Equity & Debt Fund

ICICI Prudential Equity & Debt Fund Growth is a Hybrid Mutual Fund Scheme launched by ICICI Prudential Mutual Fund. This scheme was made available to investors on 12 Oct 1993. The scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio in equities and related securities as well as fixed income and money market securities.

3) DSP Tax Saver Fund

DSP Tax Saver Direct Plan-Growth is an Equity Mutual Fund Scheme launched by DSP Mutual Fund. This scheme was made available to investors on 16 Dec 1996.

The scheme seeks to generate medium to long-term capital appreciation from a diversified portfolio that is substantially constituted of equity and equity-related securities of corporates and to enable investors to avail of deduction from total income, as permitted under the income tax act. Hence, this is considered another top Mutual fund investment plan for beginners.

4) Mirae Asset Tax Saver Fund

Mirae Asset Tax Saver Fund Direct-Growth is an Equity Mutual Fund Scheme launched by Mirae Asset Mutual Fund. This scheme was made available to investors on 26 Apr 2019. The scheme seeks long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related instruments.

Mira Asset Tax Saver Fund - Direct plan - Growth is ideal for investors looking to park their money into an investment for more than three years. Being an ELSS fund, it serves the dual purpose of tax saving and long-term wealth creation for investors.

5) Kotak Tax Saver Fund

Kotak Tax Saver Fund Direct-Growth is an Equity Mutual Fund Scheme launched by Kotak Mahindra Mutual Fund. This scheme was made available to investors on 05 Aug 1994. The scheme aims to generate long-term capital appreciation from a diversified portfolio of equity and equity-related securities and enable investors to avail of the income tax rebate per prevailing tax laws.

6) Edelweiss Aggressive Hybrid Fund

Edelweiss Aggressive Hybrid Fund Direct-Growth is a Hybrid Mutual Fund Scheme launched by Edelweiss Mutual Fund. This scheme was made available to investors on 30 Apr 2008. The scheme seeks to generate long-term capital and current income growth through a portfolio investing predominantly in equity and equity-related instruments and the balance in debt and money market securities.

7) SBI Equity Hybrid Fund

SBI Equity Hybrid Fund Direct Plan-Growth is a Hybrid Mutual Fund Scheme launched by SBI Mutual Fund. This scheme was made available to investors on 29 Jun 1987.

The scheme seeks to provide investors with long-term capital appreciation along with the liquidity of an open-ended scheme by investing in a mix of debt and equity. The scheme will invest in a diversified portfolio of equities of high-growth companies and balance the risk by investing the rest in fixed-income securities.

8) Baroda BNP Paribus Aggressive Hybrid Fund

Baroda BNP Paribas Aggressive Hybrid Fund Direct-Growth is a Hybrid Mutual Fund Scheme launched by BNP Paribas Mutual Fund. This scheme was made available to investors on 15 Apr 2004.

The Scheme seeks to generate income and capital appreciation by investing in a diversified portfolio of equity-related and fixed-income instruments.

Conclusion

Now that you've considered the funds you want to invest in or have chosen the funds based on thorough research, it's time to invest a lump sum or begin a Systematic Investment Plan.

Using the framework described above, you can construct a mutual fund portfolio aligned with your investment objectives which can assist you in getting started with the target-based investing of your choice.

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Research Analyst - Bavadharini KS