The Mint50, a curated basket of 50 mutual fund schemes, offers products that can fit into three categories that cater to three primary expectations of investors—products that cater to the core portfolio investment needs, that serve as facilitators to help execute money decisions, and products that serve as riders to enhance the portfolio’s need for return or stability or diversification. We call these categories core, facilitator and satellite, respectively. Investors can select a mix of schemes according to the demands of their financial situation.
The starting point for building a portfolio would be asset allocation between equity and debt. This would consider the tenor of the goals and the need for growth and liquidity.
Core: For long-term goals with investment horizon of at least seven years, consider investments in core schemes. For goals that are five to seven years away, consider investments in large-caps, aggressive hybrid funds and the more conservative schemes in the large-and-mid-cap and multi-cap categories. For goals that are less than five years away, consider the short duration and the corporate bond categories.
Facilitator: Use the categories in the facilitator category to help you park your money. Select the category based on the period for which you want to hold the money. Buy liquid funds, ultra-short funds and low duration funds, in that order. Money that has to be held for a short period before it is invested, money held for an emergency fund, money that has to be parked for a short period before it is used to meet goals are all needs that these categories of funds can meet.
Satellite: These can help give an additional boost to the portfolio—in terms of returns, stability, diversification, and so on.
Equity fund categories such as focused funds, value or contra funds, small-cap funds can find a place to give portfolio returns a lift. For example, contra and value funds, typically, invest in sectors and themes that are not currently popular and can act as a hedge against the risks in the growth strategy, followed by most funds in the core portfolio. A small-cap fund can give a return boost to the portfolio when the segment is expected to do well. Investors need to have an adequately long horizon of more than five years for most of these strategies to work.
An international fund can give geographical diversification benefit to the portfolio. A conservative hybrid fund can be used to give an equity flavour to a debt-heavy portfolio if the investor does not want to take the trouble of tracking the performance of a pure equity fund.
You need not have all the 50 schemes in your portfolio. It is not necessary to select a scheme from each of the 16 categories either. That would depend upon the investor’s goals and risk appetite. A portfolio of eight to 10 schemes across categories that are relevant to your financial needs should suffice for most of you.
Remember that not all schemes in a category are similar. There will be variations in strategy and style that will impact the risk and return of the scheme. We have tried to capture the risk and return features in the commentary with each scheme to give you an idea of suitability. Use the factsheets of mutual funds to understand more about the returns and risks in a scheme before investing.