How To Create A Portfolio Of The Best Mutual Funds With Robo-Investing - Outside View by PersonalFN

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How To Create A Portfolio Of The Best Mutual Funds With Robo-Investing
May 17, 2018

While looking for some healthy food options online, I came across a website claiming it could create a meal plan for me in one go.

Imagine a portal creating a meal chart for you within minutes?

Mind you, it wasn't random at all.

It had a list of questions that were similar to the ones my real-time nutritionist had inquired in the first meeting.

Basically, this platform took into consideration the body's scientific measures. It asked for my fitness goal such as weight loss/ muscle gain or loss and so on.

Not only did it create a plan, but it also provided a summary of my body's nutritional requirements. At that point I realised how ignorant I was about my body's macros - fats, proteins, carbs, and vitamins.

Many times, people feel vulnerable discussing their physical and financial health with someone in person. I am one of them.

I feel extremely unsafe to check my weight and other fitness parameters around another person, professional or otherwise.

The fear of being judged stops many from approaching a fitness or even a financial planning professional. But eventually, this could also mean continuing to lead an unhealthy lifestyle, or as regards your personal finance, unhealthy financial health.

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Now let me tell you that you no longer have to feel that way. Because there are many financial robo- advisory platforms available online to help you make investments.

But very few help in creating a portfolio in an unbiased way --with research-backed recommendations and only Direct Plans.

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Allow me to take this opportunity to notify you that PersonalFN is soon launching an ultra-reliable robo-advisory fee-based platform that will offer only Direct Plans and it will be backed by honest & unbiased research that has outperformed the BSE-200 index in last 15 years by over 80%!

Our platform will create a ready-made mutual fund portfolio for your investors only after considering your overall financial health and risk profile.

The biggest benefit of investing via a robo-advisory platform is that it is devoid of any human biases. A lot of times, investors have been mis-sold financial products and received inadequate service. Unfortunately, some financial advisors provide biased recommendations and advice.

Hence, opt for a platform which provides unbiased recommendations backed by comprehensive research methodology.

We have tried to keep the whole process simple and tried to make it easier for you.

You just got to follow these simple steps below:

  • Complete the registration
  • Submit necessary documents to activate your investment account
  • Assess your risk profile
  • Get a recommended portfolio based on your inputs
  • Invest with a single click

As soon as you specify your financial goals and objectives on the platform, our well-researched recommendations will automatically start appearing on the screen. All that remains is for you to click and invest in the recommended portfolio.

To give you an overview, the recommendations will broadly come from a 2-step approach:

The first step involves eliminating the mutual fund schemes that shouldn't be a part of your portfolio, and second step is the process of selecting best mutual funds.

Step 1: Process Of Elimination

While eliminating mutual funds, one must keep in mind the following points:

Refrain from investing in sector/thematic funds: Over the long-term following one theme or sector is a very high risk-high return investment proposition.

This is because; thematic and/or sector funds have a tendency of plunging lower more during the downturn.

[Read: Why Thematic Funds Are Not Solid Long-Term Investment Bets]

Hence, we believe that a diversified equity funds is best option. It is well insulated to handle different market conditions.

Avoid duplication: We strongly believe and recommend avoiding two or more schemes that seem to be doing the same thing (in terms of mandate, style). You must choose one out of the two and eliminate the other.

In short, a peer comparison study is necessary.

Also, evaluate long term performance when investing in mutual funds. We evaluate a fund's performance over the long-term (3-5 years) and across market cycles. This enables understanding whether the fund has stood the test of time. It is important to see how mutual funds sail during the turbulent time and to ascertain their stability.

Often investors opt for funds depending on their past performance; what is ignored is its performance in the bear phases.

Step 2: Process Of Selection

Once you've conducted the elimination process diligently, the second step will come naturally.

For instance, if you have ignored all the sector/thematic funds, that leaves you with just the diversified ones.

Likewise, if even those funds that have not completed a 3-year track record, you are automatically left with those who have a minimum 3-year track record.

While selecting mutual funds, you must keep the following points in mind:

Diversify across market caps: We suggest holding a mix of both large cap as well as mid cap funds, since both have their inherent strengths.

The proportion of investments in mid cap funds will depend upon the risk appetite of the investor. For example, a 25-year old person could have a higher allocation towards mid cap funds, as compared to a large cap fund.

Similarly, it also pays to invest in an equity fund that can invest in both large caps and mid-caps depending on the opportunity; these funds are commonly referred to as opportunities / flexi cap / multi cap funds.

Look across investment style: As an investor, you should go for both - well-managed growth style and value-style equity funds.

This will help you to capitalise on opportunities across the board.

Growth funds invest in well-managed companies that are fairly valued with a view that they are likely to perform even better going forward.

Value-style funds invest in well-managed companies that are undervalued (temporarily) with the foresight that they will achieve their fair value going forward.

Add stability: Investing in a balanced fund helps in adding stability in the portfolio. You see, they are a good way start your mutual fund investments.

If you are not willing to invest entirely into equity or debt funds, then you must invest in balanced funds.

Do thorough research and analysis: And to top it all, the selection process must be purely based on thorough research and analysis. Your agent, neighbours, and colleagues are welcome to share their views, but remember at the end of the day it's your money, not theirs.

Confused, or are finding it to be a complex task?

[Download PersonalFN's Guide: 10 Steps to Select Winning Mutual Funds]

Leave to PersonalFN for superlative and unbiased advice backed by thorough mutual fund research. PersonalFN's robo-advisory platform will do a risk profiling - much as how a doctor diagnoses well before giving a prescription.

Advice backed by risk-profiling would make sure that the investment recommendations are best suited for you. This way you build a solid mutual fund that can help you accomplish your envisioned financial goals.

Do not be lured by fancy figures flashed by an agent or a media report. Make sure your investments are devoid of any bias, and keep emotions at bay.

And stop procrastinating and start planning today! Remember, the earlier you start planning and investing, the better it is for your financial future.

Stayed tuned for the release of PersonalFN's ultra-reliable robo-advisory platform.

Happy Investing!

PS: Save yourself the time and energy that goes into fund selection, opt for PersonalFN's Premium Mutual Fund Research service 'FundSelect'

Every month, PersonalFN's FundSelect service will provide you with an insightful and practical guidance on equity funds and debt schemes - the ones to buy, hold or sell, thus assisting you in creating the ultimate portfolio that has the potential to beat the market.

PersonalFN has a dependable track record and has guided investors achieve their envisioned financial goals with their unbiased views.

PersonalFN does not take shortcuts with its research before recommending mutual fund schemes to investors. A comprehensive rating methodology is followed.

PersonalFN analyses thousands of data points to shortlist schemes and also applies a whole host of quantitative and qualitative parameters to select winning mutual fund schemes for your portfolio.

PersonalFN's Mutual Fund Research service 'FundSelect' Vs. S&P BSE 200

Out of every 4 funds recommended in the FundSelect, 3 have always outperformed BSE 200 index. That's the success rate of PersonalFN.

And there's more great news!

FundSelect is turning FIFTEEN.

And on this auspicious 15th anniversary of FundSelect, we intend to make it "ultra-special" for you.


Well, how about getting 1-Year of access to FundSelect virtually Free?

And there's MORE...

Get FREE access to our premium report, 'Top-5 Funds For 2020

So, hurry and subscribe to PersonalFN's FundSelect NOW!

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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