Each one have their own style of investing. Some focus on diversification, some on concentration, some on thematics and so on.
My construct for a MF is as follows:
50% Index funds (equal weightage or more towards Indian schemes)
a) Sensex
b) Nifty
c) Nifty Next
d) S&P
e) China Shanghai
f) Japan Nikkie Index
g) European Index
20% Multi and Flexi Funds
a) Multi Asset fund
b) Flexi cap Fund
10% Mid/Small cap Funds
a) Mid cap funds
b) Small cap funds
10% Thematic Funds
a) Banking
b) Pharma
c) IT
d) Chemical
e) Infra
Ok, now that we have done, some reasoning for the above.
Most of us do not have the time or inclination or ability to read and analyse the stock market. Thus 60% is put in Index which reflects the best of the stock market companies churned every now and then. So you are primarily invested in best of the companies all the time. Rare that you may lose based on the past trends.
You may have noticed I have not added Large cap funds. These are primarily in the index, so it will only duplicate.
Next is the multi asset (diff class of assets like gold, etc) and Flexi cap which has a mixture of large, small and midcap. These protect you from volatility.
Then comes the risk part in small and mid cap. If you want a slightly better returns a certain level of risk is taken and it is in this group.
Finally, thematic sectors. I notice that the market tends to work on themes. Thus Banking may be flavor of the month, then pharma etc. So this has a small risk, but returns can be higher. But a lot depends on when you get in and get out.
As can be seen, this is MY CONSTRUCT AND NO RECOMENDATIONS IF THIS IS A GOOD ONE. I believe, however that this can be a safe and non risky one with returns that should be reasonable. If you want more risk and returns decrease index and go more with small/Mid cap or thematic.
MF helps in getting a return without the worry of analysing/taking a buy/sell call etc. It is best left to experts.
I have not touched debt funds as those with poor, but steady returns may not beat inflation and can be only used at retirement for security of capital reasons.
