Mutual Fund Portfolio Mastery: Crafting the Best Equity Investment Strategy

The aspiration for wealth creation is universal, with individuals dedicating significant effort to earn and harboring hopes of achieving substantial financial success in the years ahead.

Earning money is one thing but preserving and growing your savings where most of us falter at creating big wealth even if getting good incomes on regular basis, along with the partners.

Embarking on the journey of investing involves a thoughtful exploration of various investment options, aligning with your risk tolerance, and envisioning your future financial aspirations.

Diversifying your investments across different asset classes is a key strategy to optimize your savings for a prosperous future.

Among the accessible and effective tools available to everyone, mutual funds stand out as a powerful instrument and create a Best Equity Mutual Fund Portfolio.

They provide the opportunity to build a substantial portfolio over the long term, helping you achieve your financial goals with confidence.

Create Best Equity Mutual Fund Portfolio
Create Best Equity Mutual Fund Portfolio

What is Mutual Fund?

Mutual fund is pool of funds contributed by investors, for a common objective of capital gain or profit from the avenues, such as, stock market, Bonds, Government securities and money market.

Mutual funds are run by Asset management Companies (AMCs), who hire best of the qualified and experienced professional from the investment world, to manage and invest your money in above mentioned investment avenues by charging a fee.

The primary goal of fund managers is to outperform benchmark indices, such as BSE Sensex, Nifty 50, Nifty Bank, Nifty Top 200, and others.

Fund managers, working full-time, strategically invest your money in high-quality stocks to construct a mutual fund portfolio that yields profits beyond the standard index returns. The additional gains achieved are termed as Alpha.

These managers conduct comprehensive fundamental and quality analysis, along with technical analysis, on the securities in which they invest on your behalf and create a mutual fund portfolio.

They consistently monitor the financial health and growth of these companies. Such actively managed funds aim to enhance your investment returns with lower risks.

Also read more about mutual funds here.

Types of Mutual Funds

There are several types of mutual funds and distributed into different categories depending upon the risk factor and targeted assets to invest in to create a mutual fund portfolio.

Some of the most popular of those are mentioned below: –

Equity Mutual Funds:

Types of Equity Mutual FundsHow they Invest
Large Cap Funds.Mainly invest in top 30 or 50 Large companies according to market capitalization
Mid Cap funds.Mainly Invest in Mid-sized companies, from 50th to 250th accordingly to market cap.
Small Cap funds.Mainly Invest in Smaller sized companies, beyond top 250 companies accordingly to their market cap.
Multicap funds.Invests in all the above-mentioned type of companies with equal limits.
Flexi Funds.Invests in all the categories of companies and make changes according to market situations and economy.
Hybrid Funds.This has a mandate of investing maximum of 60% in equities, rest in Fixed income assets. These are also called as balanced funds.
Asset allocation funds.Here, investments are allocated to different asset classes, like, stocks, bonds, Gold and others.
Sectoral Funds.Invests in a particular sector companies, such as, Finance, Technology, FMCG, Infrastructure and others.
ELSSEquity linked saving schemes are the tax saving mutual funds, perform similar to Large cap Funds but have the lock in period.
Mutual fund portfolio building

Why you should invest in Equity Mutual Funds?

Equities, or the stock market, have demonstrated their capacity to deliver the highest returns over the last three decades, surpassing other asset classes.

It’s crucial to acknowledge that these returns may exhibit volatility due to market fluctuations.

Yet, through strategic investments in high-quality stocks or a top-performing Equity Mutual Fund Portfolio over the long term, you stand the chance of outperforming the index by a substantial margin, leading to noteworthy wealth creation.

Investors should be prepared for short term fluctuations in the stock markets which may derail returns on your investments. Those may have resulted due to many factors like, war, pandemic, financial crises and many more such reasons, but you should remain invested.

BSE Sensex, India, has returned 13.42% overall annually, in the last 3 decades

BSE Sensex Index
BSE Sensex Index returns over last 3 decades

As evident from the chart depicting the performance of the Indian stock market over the past three decades, it has delivered an impressive compounded return of around 14%, surpassing other asset classes.

To illustrate, if you were to achieve similar returns in the future, investing just Rs. 10,000 each month could potentially build a corpus of Rs. 5.6 Crores (Rs.56mn)

How to create an equity mutual fund portfolio?

Create Best Equity Mutual Fund Portfolio
Create Best Equity Mutual Fund Portfolio

As we have seen there are different types of equity mutual funds and all are investing in the stock markets of a particular nation, resulting, there can a confusion to pick the mutual funds schemes which is best for your financial goals.

First and foremost, you should pen down your financial goals to be the basis of investing in mutual funds portfolio. Your financial goals list should consist of the following details:

  • Name of the goals or for which you are investing your money.
  • How much amount do your need to fulfil that goal?
  • What are the timelines for each of those goals, preferably, the date of completion.

Let’s take some examples to set your financial goals for a household, in the table below: –

Name of goalsAmountTimelines (years)
New House200000010
New Car10000005
Child’s Higher Education300000015
World Tour5000005
Child’s Marriage200000020

Remember, inflation is an important factor to consider, while calculating the amount of a particular goal, the rate of inflation may vary from region to region, which reduces your expected returns over a period of time because prices always increase in the future.

You don’t need to invest in every type of mutual fund to achieve diversification across market caps or listed stocks.

Opting for the main categories of mutual funds can effectively include the best stocks in your portfolio without the need for excessive diversification.

Where to invest to achieve your financial goals?

You have understood about how to develop and set your financial goals, in the form of sum of money required at definite period of time. Now, next step is where to invest your money intelligently, so that you reach your goals comfortably and get maximum returns through mutual fund portfolio.

First, you should split your financial goals into different timeframes, based on years, as shown below:

Short Period Goals in 3 years or less
Medium term Goals in 3 to 5 years
Long term Goals in 5 to 10 years
Very long term 10, 20, 30 and so on.

As you can see in the above table, there can be different target timelines to achieve your financial goals, but equity mutual funds will be only appropriate for medium term and long-term financial goals, which is mainly 3 years and more.

Here are some of the types of mutual funds you may invest according to the duration of the goals:

PeriodTimeframeTypes of Suitable Funds schemes 
Medium termGoals in 3 to 5 yearsHybrid, Balanced advantage funds, large cap or Index Funds
Long termGoals in 5 to 10 yearsLarge cap, Mid cap and Flexi cap
Very long term10, 20, 30 and so on.Flexi cap and Small caps funds

Best Equity Mutual Fund Portfolio for you

Now when we have decided the types of equity mutual funds we want to invest in, we must choose the mutual funds schemes portfolio across the market caps to gain best from the stock market up side over a period of time.

Here is the strategy to create a model portfolio of mutual funds for diversification:

  1. Large cap funds – 50%.
  2. Mid cap Funds – 20%.
  3. Small cap Funds – 10%.
  4. Banking and financial fund – 10%
  5. International Equity Fund – 10%
image 1

And, here is the model portfolio of mutual funds schemes to invest for best long-term returns:

S.No.Type of FundName of MF scheme
1.Large Cap FundMotilal Oswal Large Cap fund
  Quant Focused Fund
2.Mid Cap fundQuant Mid Cap Fund
  HDFC Mid cap Opportunities Fund
3.Small Cap FundNippon India Small cap fund
  SBI Small Cap fund
4.Banking & financial sector fund (Optional)SBI Banking & Fin services
5.International Equity ExposureNippon India US Equity Opportunities fund
  Motilal Oswal Nasdaq 100 FOF
Best Equity Mutual Fund Portfolio

Moreover, if you are just starting to invest or have less money to invest to put money in all the above types of schemes, choose a Flexi mutual fund scheme, to invest across the market, such as, UTI Flexi Cap Fund.

Additionally, if you want to invest in mutual funds and save income tax too, then you can invest in ELSS funds like, Mirae Asset Tax Saver fund, which can be an alternative to large cap funds partially and may also, add an Index fund.


Embark on your journey to create wealth with mutual funds—a doorway to the dynamic stock market. Tailor your investment path by matching mutual fund schemes with your risk tolerance and financial goals.

Start your investment journey with a modest beginning, learning as you go and progressively increasing your investment. Success lies not in picking the perfect mutual fund but in starting early, leveraging the power of compounding, and having the patience to stay invested.

Be part of the story of your country’s and the world’s economic growth by empowering yourself financially through thoughtful mutual fund investments. Learn about investment risks, boost your confidence as you gradually invest more, and grow your financial commitment.

The key is not rapid returns but a commitment to long-term investing, embracing the benefits of compounding over time.

Early start, understanding the strategies, and unwavering patience create a powerful trio that leads to lasting wealth. Are you now prepared to generate substantial wealth through mutual fund investments?

Disclaimer: This is not a direct advice to anyone. Do consult with your financial advisor for making all your financial and investment decisions.

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