How to build a good mutual fund portfolio?

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Investing in mutual funds is often considered a safer option than investing in stocks. However, to create a mutual funds portfolio, an investor needs to first assess their goals and risk appetite. Building a mutual funds portfolio requires planning and understanding of various options available.

The Money9 Helpline hosted Kaustubh Belapurkar, director – manager research, Morningstar to answer all the mutual fund investment-related questions from the callers.

Here are some questions:

Vikas Gupta: Can I invest in a balanced advantage fund (BAF) for meeting long-term goals of children’s education and retirement?

Belapurkar: BAF is a type of hybrid fund that invests in both equity and debt, simultaneously. The allocation of these funds is based on the market evaluation.  If the market valuation is on the higher side the allocation in equity will gradually decrease. In March 2020, when the markets were down the allocation of the funds was increased. So BAF basically captures the markets. It is also important to know that BAF is not a ‘one size fits all’ solution. It should form a part of your portfolio along with other investment tools.

Shashikumar Prajapati, Bihar: What is the difference between value fund and focussed fund? Which one is better for long-term investment?

Belapurkar: Value stocks were created by Sebi, wherein the category manager focussed on stock picking to value stocks. Value stocks are fundamentally good and reasonable and their value is also on the lower side. Investing in these stocks requires patience and time. Focus funds are different. Fund manager creates a concentrated portfolio that can have growth stocks or value stocks.