Want to be a crorepati without much risk? Create this portfolio of mutual funds in FY19

Indian markets surge to fresh record highs in the financial year 2018 before losing a bit of momentum. The index rose over 11 percent while many stocks gave multibagger returns.

But, stock picking could become a tiresome as well as a difficult process if you are not well versed in reading balance sheets or have no idea what about the dynamics of the equity markets.

Considering the fact that equity asset class is likely to deliver maximum returns when compared to other asset classes, ignoring it might not be the right idea.

Investors should use the opportunity of the dip and add mutual funds from across themes to make a stable portfolio which can help in wealth creation.

If you are in the age bracket of 35-40 years and construct a portfolio which does not carry as much risk as direct equities then right fund selections across various categories should be able to do the job for you, suggest experts.

“If the investor has long-term financial goals and no idea about how to invest in equities, equity mutual fund can be one of the best vehicles to achieve the goal. Unless you are an expert or are willing to spend considerable effort in becoming one, it doesn’t make sense to invest yourself— Equity funds are the right choice,” Radhika Gupta, CEO, Edelweiss Mutual Fund told Moneycontrol.

Asset allocation is very crucial for making a stable portfolio. The allocation changes with time as and when the need of investors change. As long as the investor is in the age bracket of 30-50 years, investment in equities is the right bet.

It is very hard to time equity markets, but instead, investors could use mutual fund route where fund managers would be able to make the right choice for you – what to buy and when to buy?

“One cannot change one’s asset allocation year on year. For a young person with limited short term liabilities, at least 60% of the money should be invested in Equities at all times. There is no point in timing the Equity markets as it just wouldn’t matter in the long term,” Raghvendra Nath, Managing Director, Ladderup Wealth Management told Moneycontrol.

“In the long term, the wealth creation would depend on the quality of stocks chosen and the underlying profit growth of those stocks. The stock prices and valuations both align to the Earning growth in the long term,” he said.

We recommend investors to allocate 50-60 percent of capital in largecaps, 20-40 percent in mid & small caps and 10-20 percent in thematic stocks.

Of the incremental savings, 30-40 percent should go towards safety to a combination of Bank FD, Liquid and Arbitrage schemes of Mutual Funds. 20-30 percent should go towards moderate safety with better return potential to a combination of options like Income schemes, Balanced schemes, and Gold.

Remaining portion should go to Equity schemes of Mutual Funds (diversified across the large cap, mid-cap, and small cap). The portfolio composition will change based on individual’s risk appetite, income levels, commitments and liabilities etc. One must visit a certified financial advisor for specific allocation advise.

Almost 30-35 percent of the portfolio should be allocated towards Banks/NBFCs (private sector and retail focussed), 30-35  percent into consumer-oriented stocks (Auto, Retail, Aviation, Entertainment, Building material, and appliances), 15 percent in Capital Goods / EPC companies 5 percent in niche exporter / special situation.Hold Cash at 10 percent at all times to take advantage of extreme volatility which will be the highlight of the next 12-15 months.