Creating an active mutual fund portfolio

Basic personal thumb rule

Pick the funds based on the goals for which I am investing and take risks appropriately. The below thumb rules help you create an active mutual fund portfolio.

1. < 5 years – Avoid if you can. (5-10% maximum in Large cap, if the goal is not top priority) 
2. 5-7 Years   – Large cap + Mid cap + Small cap (85% – 10% – 5%)
3. 7-10 years – Large cap + Mid cap + Small cap (30% – 50% – 20%)
4. 10+ years   – Large cap + Mid cap + Small cap (20% -30% – 50%)

** This is a thumb rule I follow which follows the general principle that, further I am from the goal, the more risk I can afford to take with respect to the investment.

Check the rating of fund managers in Citywire.in

Citywire is an excellent resource to know the ratings of fund managers:

1. Global rating of fund managers over last 1/3/5 years
2. Ratings of all funds owned by the fund managers 1/3/5 years
3. Longevity and consistency in their ratings is what I look

Check the funds performance

1. easymf.com | valueresearchonline.com can be used to check the shortlisted funds returns (1/3/5 years)
2. A thumb rule – The fund is not too huge not too small (5K Core < AUM of chosen fund < 20K Crore)
3. I don’t have too many funds already with the AMC
4. Risk adjusted returns (Information ratio of the fund, is in the top 3 of the chosen category of funds)

I do not pick Thematic funds at all in my portfolio since I leave that to the particular fund managers to do that job for me. I pick 5 active funds in my portfolio at the maximum and do not change them unless there is a big change in the fund manager by itself. We will have a separate blog on situations where I changed a mutual fund and how I did it.