Mutual fund calculator: Build a healthy investment portfolio in debt as well as equity

Mutual fund calculator: Build a healthy investment portfolio in debt as well as equity

Just like a balanced diet is essential for retaining a healthy body. Similarly, a balanced investment strategy is key to a healthy investment portfolio. Investment portfolios need not necessarily be super complicated ones; rather, a disciplined approach is a secret key here. Considering the recent market trends, mutual fund is the talk of the market now. With diversified mutual fund investments alone, you can achieve your financial objectives. Moreover, using a mutual fund calculator, you can even see the prospects of your planning and then proceed accordingly.  

What is an investment portfolio?

An investment portfolio is a term applied to a collection of several assets, including investments like ETFs, mutual funds, bonds, stocks, etc. For proper planning, you can take professional help and guidance and then decide. 

4-step process to build a healthy investment portfolio:

  • Deciding the level of help required:

    You can always decide about your own finances by yourself. However, seeking guidance from Robo-advisors might prove to be a cheap and plausible option. They consider your risk appetite and investment horizon, and objectives and make the decision accordingly. Financial advisors are always at your service in case of needs.

    Tip: You need to understand how much help you need and then choose your platform accordingly. However, if you need to understand your investment requirements, you can use this mutual fund calculator.
  • Account in sync with objectives:

    Building an investment portfolio requires you to have a proper financial plan. Then you need to plan your investments according to your objectives and financial goals. Once the investments are synced with your future financial goals, the chances of fulfillment and continuation of the investment are much higher. Thus, before making your choice, clarify your objectives well beforehand. 
  • Risk appetite:

    Then you need to understand your risk appetite according to your asset allocation. This could be easily determined with the help of a questionnaire. You need to fill in your actual details and then answer the questions based on your risk appetite. This would determine your risk profile.

    Only after determining your risk profile can you opt for the products needed to fulfil your financial goals.
    1. Start investment early, without procrastinating:
      There is many a slip between the cup and the lip, i.e. people often think they would ‘want’ to invest but do not end up actually initiating the same. This is the biggest hiccup to a healthy portfolio, i.e. postponement or procrastination and waiting for the right time. It is often said that instead of “timing” the market, you need to calculate your “time in” the market. So, it is better to start investing first and then change it as per your change in requirements or markets.
  • Rebalancing your portfolio:
    Depending on contemporary market trends or changes in your requirements and priorities, your existing investment strategies might prove to be insufficient. Regular reviewing of the performance of your investments might prove so. Under such circumstances, rebalancing your existing investment portfolio becomes essential. 

Essential aspects of money management

There are two essential parts of proper finance management. The first one is the practical characteristics of the assets involved, while the other one is the emotional characteristics of the concerned investor. When these two aspects are in sync, then a properly balanced investment portfolio becomes the ultimate result. A customised approach is the best-suited key here. 

In order to achieve this, you must never blindly follow what your peers and acquaintances have done. Every individual possesses a different set of responsibilities, and that changes everything. At 35 years, one may still choose to remain a bachelor, while one might have to take the entire responsibility of a family at 30. 

If you cease to invest during the fall of the equity prices, you run the risk of over-allocation to debts without benefiting when the market recovers and the equity prices rise. If any equity investment is segregated for a specialised purpose, irrespective of the external conditions, you must stay put. Ideally, your investment portfolio becomes shielded against market volatility, especially when it is a bouquet of separate asset-class investments. 

Factors influencing investor’s debt-equity allocation

Some of the major factors that influence the debt-equity allocation of an investor include:

  1. Age: Young investors are comparatively more shielded against recovering from market downturns than aged investors. That is why they can afford enhanced equity exposure.
  2. Risk appetite: Depending on the circumstances, some investors prefer to play safe and therefore possess a low-risk appetite. Debt-oriented investments are ideal for them. However, higher equity allocation is perfect for investors with higher risk appetites and aggressive approaches.
  3. Circumstances: Different circumstances and turning points in life, like marriage, childbirth, higher education, pre-planned treatment costs, etc., require special care. Such events may influence the allocation of the proportion of debts and equities. 
  4. Tenure of investment: The investment tenure also influences the choice and type of investment for the concerned investor. Short-term investment choosers would prefer to steer clear away from very risky equity options or long-term debt investments. 
  5. Tax planning: Tax saving is a crucial option for influencing investment options. If you prefer tax-saving instruments, then debt-oriented investment options are ideal. 

Factors for prudent debt-equity investment:

  • Risk appetite: Your risk appetite influences your debt-equity allocation to a considerable extent. Debt investments offer returns with stable interest rates, with minimal risk of underperformance. With enhanced risk appetite, equity investments are more suitable for inflation-proof wealth creation, especially in the long run.

  • Investment objectives: It is best to maintain a target-oriented investment approach. Your investment type will differ in that manner. Low-risk investment options are ideal for short-term investments, while equity options with comparatively higher risk conditions are more suited for the long term.

  • Dynamic approach: Depending on the ongoing circumstances, your current financial status, level of income, life events, etc., you must carefully manage and monitor your financial portfolio, rebalancing them if the need arises and altering the proportion for debt and equity. Using a mutual fund calculator will aid in the process. 

Conclusion

For asset allocation among debts and equities, there is no standard fixed rule applicable to every investor. It differs from person to person and needs to be customised. You can take the help of a mutual fund calculator and/or a professional financial expert to help you make the right approach. 

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