4 types of mutual funds you should include in your portfolio

There are some mutual fund categories that walk into most portfolios because they fulfil basic investment needs that people are looking to meet. “Indices are rebalanced periodically by the index maintenance authorities to keep it relevant.” For more seasoned investors, focused large-cap funds that hold a concentrated portfolio of large-cap stocks may also be considered, he added. In the current year, when broad-based Nifty 500 Total Return Index fell by 6.67%, the return of the five best performing funds in the category fell by an average of only 1.35%. “The error they make,” he said, “is in treating it like other tax-saving products and not implementing the discipline essential to equity investing like investing periodically to benefit from cost averaging and holding for the long term.” Debt funds with short terms meet the financial need for a safe product to hold funds with the benefit of liquidity and ease of making transactions. At the same time, Sunder sees many investors in the 30% and 20% tax brackets making the switch to debt funds to take advantage of the indexation benefit that applies when you hold a debt fund for at least three years.