How to Build a Long-Term Investment Portfolio with Mutual Funds?

With technology, we have not only lost social connection but also patience. Everything now needs to be instant, be it good or bad. However, even in this era of 10-minute groceries and 24-hour deliveries, a long-term investment strategy still scores high. It may not be flashy, but it is powerful. Powerful enough to turn your monthly five thousand rupee investment into lakhs in years to fulfil your life goals.   

Over the past two decades, Nifty50 has consistently performed, delivering an average annual growth rate of 12.3%. Even at its lowest, returns hovered around 5.5%—comparable to what you’d typically earn from a decade-long fixed deposit.

If you invest a sum of 1 lakh for 10 years in a bank deposit, you will earn Rs.1.79 lakh at the end of the tenure, presuming a moderate return of 6%. However, suppose the same amount is invested in mutual funds for 5 years, specifically in large caps. In that case, you can expect to get Rs. 3.40 lakhs, assuming a modest return of 13%, which is the average return of large-cap funds with a 5-year horizon. This amounts to almost 190 pc of FD returns. Also, if we compare the performances of Gold, another major asset class, against mutual funds for a 10-year horizon, we will find equity funds delivered a return of 12.36%(large-caps), 16% (mid-caps) and 16.67% against 11.65% given by Gold.  


This article will walk you through the steps of building a resilient, diversified mutual fund portfolio with a well-crafted strategy, choosing the right funds, and setting up SIPs using smart tools like long-term investment apps and SIP calculators. 

Step-by-Step Guide to Building Your Portfolio 


Go through each of these six steps to build a long-term and balanced portfolio. It is not that by following the steps blindly, you are set up for wealth creation. It needs discipline, patience, rigour and focus to apply these steps in real-life scenarios. 

  1. Step 1: Define your financial goals to understand the time horizon of your investments. Decide your priorities, whether you want to save for a car, or down payment for a house, an international trip, your retirement or your child’s education.
  2. Step 2: The time horizon of your investment depends on the life goals that you need to fulfil. For buying a car, a short-term investment for about 3 years may suffice, but for building your retirement corpus, you will need a long-term horizon which is more than 10 years. 
  3. Step 3: After deciding on the time length, assess your risk tolerance level and check your current financial requirements. You must not strain financially to invest. 
  4. Step 4:The next step is to find the right kind of mutual fund to invest in based on your risk profile and aligned with your financial objectives. Choose a balanced approach with large-cap funds for stable growth, mid and small caps for higher returns, ETFs and gold for diversification and debt funds for capital protection. 
  5. Step 5: Begin with small steps and start with a systematic investment plan to understand how much you need to invest monthly and for how long to reach your future goal. Use a long-term investment app to calculate the exact amount required to fulfil your financial dreams.
  6. Step 6: Keep reviewing your allocations at regular intervals to track and monitor the returns and adjust your portfolio as per the market conditions.  

Tools You Can Use 

Due to unique advancements of technology, nowadays it is no longer required to wait for a banking advisor or a mutual fund advisor to make an appointment, visit you and guide you on your portfolio. Information is just a click away. For real-time Nav updates and portfolio analysis, follow trusted platforms like ET Money, Groww, etc. Get a projection of the future value of money for your current monthly investments via the SIP calculator to understand how long you might need to keep investing. Check out a long-term investment app dedicated to helping you check, invest and visualise all on the same platform. 

Common Mistakes to Avoid 

No matter what you do and how you decide to do it, do not blindfold and trap yourself by committing some very simple but major mistakes.

  1. Last year’s innovator may be today’s laggard. Do not follow past performances blindly and watch out for consistencies rather than short peaks of success. 
  2. For long-term investments expense ratio can also matter. Checking these expenses towards administration and fund management may seem minor in the beginning, but may amplify and eat into your returns in the long run.
  3. By now, you must know the criticality of diversifying your portfolio. Putting the majority of funds in one sector, company, or even one type of mutual fund may lead to irrecoverable losses during a heavy market downturn. To counter this market risk, diversification becomes an essential tool. 
  4. Markets will have ups and downs like any business cycle. Analyse the situation and be patient instead of panic-selling and regretting it later.

Conclusion 

Building a long-term, healthy investment portfolio is like cooking up traditional recipes wfith your own twists for preparing a thali that will give you long-term health and happiness. Do keep in mind that wealth is created by the time you spend in the market and not by timing the market. So download the long-term investment app, set your long-term life goals, and begin your journey. One SIP at a time. 

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