Ready to take your first steps into the world of investing and portfolio building? Congratulations on a wise decision! While there is no such thing as the “right time” to invest, starting early in life has its benefits. But it’s not just about taking a leap of faith and blindly investing your hard-saved money into trending investment options.

A smart start with proper research and study could change the course of your investment journey and life. Because, as the saying goes, well begun is half done. So, let’s begin.

Starting at the Start: Saving vs Investing

First things first: ‘Investing’ and ‘saving’ are two different concepts. Saving is basically setting aside a portion of your money for future needs. Though this is a good financial habit, savings do not increase in value by themselves. Yes, they could earn some interest but might not be enough to ensure your financial independence. Investing, on the other hand, is a way of putting your money to work in the equity, debt and other asset classes that generate value in the long term. Investing regularly, progressively and smartly can help you achieve your financial goals while helping you create wealth in the long term.

Also Read – Saving vs Investing

How to design your mutual fund portfolio for long-term growth

A smart way to start your investing journey is through mutual funds. There is a whole universe of mutual funds that use different investing styles, invest in different types of stocks, sectors, and asset classes, and have varied degrees of risk and return. You can design a portfolio of mutual funds that matches your risk preferences and aligns with your financial goals. Here’s how to get started with portfolio design:

1. Know your goals and accordingly allocate money to different mutual funds. :
   Mutual funds are all about investing towards your financial goals as they are a cost-effective way of earning equity-linked returns. The first step is to know what you want and how much you want. Your financial goal will help you determine how much money to allocate to which fund.
   
   For instance, long-term goals like building a retirement portfolio or funding a child’s education need lakhs of rupees. But you also have 15-20 years or even more if you start investing early. You can use calculators to gauge how much you need to invest to achieve your long term goals.

2. Know your mutual fund
   Once you know what you want, it is time to study the mutual funds that can help you achieve it. Equity funds are ideal for long-term goals, whereas debt funds are ideal for short-term goals. Then there are hybrid funds that combine the strengths of equity and debt and aim to generate reasonable returns across market cycles.
   
   Within these broad categories are actively and passively managed funds, each having a different investment methodology to generate returns. You can also align your investing style with your goals and select the mutual fund. For instance, if you are bullish on large-cap stocks, you can invest in a large-cap fund. If you want to invest in the Nifty 50 stocks, there are index funds that replicate the Nifty 50 Index.

3. Divide your mutual fund portfolio into core and secondary holdings:
   In the beginning, it is better to start by investing for your long-term goals by creating a “core portfolio”. The core portfolio can have strong well-diversified mutual funds that invest across asset classes such as balanced advantage fund, flexi-cap fund, and a debt fund, to cover your short, medium, and long-term financial goals.
   Keep investing in your core portfolio regularly in a disciplined manner for the long term and do not redeem unless it's time to realize the goal. A good way to go about this is through a systematic investment plan (SIP). Small regular monthly investments could snowball into a huge core portfolio over time.
   
   While strengthening your core portfolio, you can make small opportunistic investments in some less diversified funds like sectoral or thematic funds or small-cap funds that are highly volatile but can potentially yield better returns in a bull market, giving your portfolio an added boost.

4. Review your mutual fund portfolio periodically :
   Mutual fund investment is more about spending time in the market than timing the market. But it is important to periodically review your mutual fund portfolio to ensure the funds you are invested in are moving in the direction of your goal. For instance, your 15-year goal is to have Rs 50 lakhs. By the fifth year, your fund should show progress in closing in on the goal. If there is no progress, you can rebalance and switch investments to another fund.
   
   While you review your portfolio performance, you can rebalance your portfolio allocation as per your investment design.
   
   The above tips can help you begin your mutual fund journey well and do half the work of where and how much to invest. Now the onus is on you to not just start well but continue well and complete well through disciplined and smart investing over the long term.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.