Model Basket of Mutual Funds: A Stabilised and Constantly Managed Asset Allocation

This portfolio is suitable for investors aged between 25 to 40 years. The portfolio is designed to serve investors with moderate to aggressive risk profiles. It strives to generate steady growth for investors by re-balancing the fund every 12 months to its original position of 75:25. The reason for rebalancing 12 months once is due to tax benefit of 5%, ((STCG (15%) - LTCG (10%)) = 5%) making the portfolio more tax efficient.

The Model Portfolio constituents are as follows:

Rationale:

1. Large-cap funds in the portfolio are restricted to 15% only because the Flexi caps and large & mid-cap funds also consist of large-cap stocks.

2. Mid-cap stocks allocation is about 30% to 30% in the portfolio, along with the large-cap allocation of 30% to 40%. Thus the portfolio will be equipped to capture returns with the growth of midcaps and capture stability from the large-cap stocks.

3. A thematic fund is necessary for a portfolio; these funds can help boost the fund's performance. But to avoid high manual intervention, allocation to thematic funds is reduced to a large extent to 10%.

4. 25% allocation is given to debt; currently, liquid funds are chosen to provide confidence to investors to stay invested for more extended periods in the portfolio.

5. We will re-balance the portfolio once a year, and automatically, this re-balancing results in buying more at low prices and booking profits when the markets are high.

The Portfolio and expected returns are as follows:

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