How to plan your investment portfolio with SBI mutual funds?

Beginning with investment is a huge step towards financial independence for every individual, however, if the investment is not aligned with the goals of that individual or their risk appetite, then the value of the investment drops. So, how to align your investments and build a portfolio that suits your financial aspirations and helps you get a good sleep at night? Diversification is the answer to your question and here you will read how to diversify your investment portfolio and make it stronger than ever. 

Steps Of Building A Strong Investment Portfolio

There are four steps to building and maintaining an investment portfolio which are – 

  • Right asset allocation: The first step is undoubtedly asset allocation. Asset allocation starts with assessing your financial situation and goals. Here you also have to assess your risk appetite of yours. Suppose you are a recent graduate, 23 years old, started your career 2 months back, and there is your father who is 55 years old, going to retire in the next five years. So, asset allocation for both of you will be different as there is a difference in risk-taking abilities and earning potential, and most important financial goals. As you are young and have a long way to go, you have time to make up for your losses, have a stable income source, and can invest more in equities to grow your wealth. Moreover, you may have financial aspirations like buying a car or a home in the next ten or fifteen years for which you need to accumulate a huge corpus. While on the other hand, your father has accomplished most of his duties and financial aspirations and at this age, his main target is to have a regular source of income from his investment. So, he can invest more in debt instruments which can help him have a regular income source. Usually, when you are young, you should invest more into equities as you can cover up losses in the long run but as the age goes up, the asset allocation should get tilted towards debt instruments to reduce the risk of the portfolio and optimize returns and regular income. 


  • Choosing the right asset: Now you know how much you have to invest in equities and debt. However, choosing the right asset is equally important as asset allocation. If you can devote time to your investment portfolio, you can go for direct investment in equities and bonds as per your asset allocation strategy. However, for most people, who don’t have time or necessary knowledge about the market, is better to invest in mutual funds like SBI Mutual Fund where you can have a fund manager who will be handling all your money wisely. Picking the right stocks/ bonds/ mutual funds or ETFs are crucial to the success of your investment portfolio. For instance, if you are looking for buying a car in the next 5 years, then small-cap mutual funds can help you attain your goal, however, there will be the risk of losing money as well due to the high volatility in small-cap funds. Similarly, you have to pick the right assets as per your financial goals and asset allocation strategy. 

  • Asses and re-asses portfolio weights: When you strategize the allocation of assets for an investment portfolio, you come up with weights for each asset class. Suppose, you have allocated 60% of your total investment towards equities, then you further broke it down to 20% in large-cap, 30% in small-cap, and the remaining 10% in the mid-cap stocks. However, while building the portfolio, you saw you have purchased more large-cap funds and thus your asset allocation has been compromised. So, you have to rebalance the same by selling some assets and buying some SBI small cap funds

  • Strategic rebalancing from time to time: Apart from reassessing your portfolio weights after building it and rectifying the same, you need to rebalance your portfolio from time to time as per market conditions to stay focused on your financial goals. Suppose, the market is going through a turbulent phase and you have 40% of your investment portfolio invested in small-cap funds. In a volatile market, small-cap funds/ stocks possess higher risk, and thus to reduce the same, you can drop some of the small-cap funds from the portfolio and add some large-cap funds as large-cap funds stay stable in volatile markets as well, compared to midcap or small-cap funds. 


Each of the four steps of the investment portfolio building process is crucial. Suppose, you finalise the asset allocation but didn’t pick the assets accordingly, then no matter how well you strategized the asset allocation, it all went in vain. Similarly, if you have picked the right asset according to the asset allocation strategy, but don’t re-assess and rebalance the portfolio from time to time, it can lead to higher risk and failure of the portfolio as well. So, if you want to have a successful investment portfolio, you have to follow each of these steps and repeat them as necessary.

Interesting Related Article: “How To Make the Best Investment Portfolio For Retirement