A Comprehensive Guide to Diversifying Your Mutual Fund Investment Portfolio

Have you been backing off from mutual fund investments due to all the associated risks? If so, you should know that you also miss out on the massive returns. However, portfolio diversification can help reduce the risks of every mutual fund investment. So, get into this article to understand how to diversify your portfolio.

1. Choose Systematic Investment Plans

If you plan to go ahead with a lump sum investment for mutual funds, you must reconsider your choices. Instead, you should focus on SIPs designed explicitly for heavily fluctuating markets. These plans will make you invest a particular sum at specific intervals despite the prevailing market conditions.

SIPs leverage the rupee cost averaging concept to let you maximize your gains. Since SIPs will eliminate the risk of entering the market at the wrong time, it will help with diversification. Regular investments will ensure you continue to benefit even when the markets fail.

2. Concentrate on Your Debt Investments

While making a mutual fund investment, most people are primarily focused on equities. In terms of their debt instruments, investors usually choose something secure or directly invest in them without considering their correlation.

Amidst the current market conditions, you must also focus on diversifying your debt instruments. Some popular debt instruments useful for diversification include dynamic bond funds, income funds, and liquid funds. Check out your debt portfolio and pick funds without any correlation with the existing investments.

3. Pick Equities for a Long Horizon

Your investment horizon also has a major influence on your diversification efforts. Volatile conditions in the market are hazardous for short-term investors. If you look into the market’s past performance, you will see that markets have always managed to bounce back from massive crashes.

Indeed, past performance will only partially determine how a fund will perform. However, economic markets have an inherent tendency to recover. So, investing for a long horizon is always a wise attempt.

4. Be Ready to Move On

Staying aware of your investments and the prevailing market conditions is imperative for all investors. It’s incredibly vital for you to be aware of what’s happening to the funds that you have invested in. This will help you understand when to cut your losses, sell your funds, and move on.

Ending Note

Selecting a suitable mutual fund investment is essential for meeting your financial goals. You can invest with the Bank of Baroda to get top returns from a curated shortlist of funds. You can invest via SIPs, standing instructions, STPs, or other channels at your convenience. So, make your investments today and constantly track your portfolio across different products and asset classes.