How we select funds and build your portfolio
There are over 1,500 mutual fund schemes in India. A portfolio needs eight to twelve.
But picking funds is the last decision, not the first. Before any fund is chosen, the shape of the portfolio has to be settled — and that shape matters more than the funds inside it.
This page explains both, in the order we actually do them. At the end there's enough for you to open a factsheet tonight and read it better than you did yesterday.
On this page
PART ONE: THE SHAPE
First, the split
One question comes before everything else: how much of this money goes into equity, and how much into debt?
Equity is the part that grows over long periods and falls hard in short ones. Debt is the part that moves little, in either direction. The split between them decides most of what your experience will feel like — far more than which funds you end up holding.
You choose the split. We explain what each one means and what it would feel like in a bad year. The decision is yours, and we write down what you chose and why.
Portfolios here run from an even split all the way to fully invested in equity. Where yours sits depends on what you are saving for, how far away it is, and how much movement you can live with.
What the split looks like
Three examples, to make it concrete.
50 in equity, 50 in debt. A steadier ride. Smaller falls in bad years, smaller gains in good ones. Suits shorter goals, or anyone who would rather sleep than squeeze.
70 in equity, 30 in debt. More growth over long periods, and noticeably harder stretches along the way. Suits money you genuinely will not touch for many years.
100 in equity. Nothing held back. Over a long enough period this has historically been the way to the most growth — and it is also the hardest to live through. There is no debt portion to cushion a fall, so when the market drops, your whole portfolio drops with it. Falls of 30% or more have happened repeatedly, and they take time to recover.
This one suits a narrow set of circumstances: a goal more than ten years away, an income you can rely on, an emergency fund already in place, and a track record of staying put when things got bad. If any of those is missing, the extra equity usually gets sold at exactly the wrong moment — and a portfolio you abandon halfway does worse than a steadier one you keep.
None is better than the others. They are different trades, and the right one depends on you — not on where the market has been lately.
These are examples to explain the choice, not a fixed product. Every portfolio is built for the person it belongs to.
Why not just a hybrid fund?
A hybrid fund holds equity and debt inside one scheme, and the fund decides the mix.
We do it differently. We hold the equity part and the debt part separately, so the split stays yours — visible, adjustable, and changeable as your life changes. A single hybrid fund hands that decision to someone else, and you cannot see it or move it.
Same idea. Different control.
What you already own counts
Here is something most portfolios get wrong.
If you already hold a PPF account, fixed deposits, or an older savings-cum-insurance policy, you already own a great deal of debt. Adding a debt fund on top can push your overall position far more conservative than you intended — without anyone noticing, because each piece was bought separately.
So we ask what else you hold before we size the debt portion of your mutual fund basket. If your debt is already covered elsewhere, we may leave it out of the basket entirely.
If you hold nothing outside, we will explain the debt option and add it only if you want it.
This is about sizing one decision correctly. We do not manage or advise on your other holdings.
As the date gets closer
A portfolio built for a goal fifteen years away should not look the same when the goal is eighteen months away.
As the date approaches, we move the equity portion into debt in stages — not in one go, and not at the last minute. The aim is simple: the money should not be sitting in a falling market in the year you actually need it.
This is a scheduled conversation, not something that happens quietly in the background. You will know each time, and nothing moves without you.
PART TWO: WHAT GOES INSIDE
How the equity part is spread
Once the shape is set, the equity portion goes across several categories rather than into one.
Across different fund houses. Two funds from the same house often share a research team, a house view, and a good deal of the same portfolio. Holding both feels like diversification and isn't. We pick from different houses so the ideas are genuinely different.
In equal measure. We do not fine-tune weights to the decimal. Precision implies a confidence about the future that nobody has. Equal weight is honest about that, and it is easier for you to follow.
Fewer categories at lower equity. If your equity share is smaller, the basket narrows to broader, steadier categories. More parts in a small allocation adds complexity without adding much.
Which categories, and how many, depends on your split and your horizon. There is no standard basket we hand to everyone.
What we don't use
Most fund selection starts with the things that are easiest to find. We start by setting three of them aside.
Star ratings. A rating is a company's opinion, and it is not a SEBI rating of any kind. It is usually built from past returns and volatility, which means it tells you what already happened. A fund can carry a high rating because of a period its current manager had no part in. We read what the fund actually holds instead.
The fund's own past returns. The most-quoted number in the industry and one of the least useful on its own. Returns tell you about a period, not about a fund. Change the start date by six months and the ranking changes with it.
The expense ratio. This one surprises people, so here is the reasoning. A smaller fund usually costs more, simply because its fixed costs are spread over less money. A very large fund costs less — but size brings its own problems: it can struggle to move in and out of smaller companies, and some funds eventually restrict how much new money they accept. Screening on cost alone would push you toward the largest funds and away from the problems that come with them. Cost matters. It is not where the decision starts.
What we look at instead
A fund is not really a fund. It is a list of companies. So we read the companies.
Valuation. What is the portfolio paying for what it owns? Looking at the aggregate price-to-earnings of the holdings tells you whether the manager is buying expensive growth or cheaper businesses. Neither is wrong, but you should know which one you are buying.
Quality. Are the underlying businesses sound ones? Steady earnings, sensible debt, returns that hold up across cycles.
Growth. How fast have the holdings actually been growing their earnings? Read alongside valuation, this is the useful one — a portfolio growing quickly at a reasonable price is a different proposition from one growing quickly at any price. That relationship is what the PEG ratio tries to capture.
Valuation, quality and growth. Read together rather than separately, because any one of them alone is misleading.
We read the holdings, not the headline. The fund's returns describe where it has been. The portfolio describes where it is now.
The manager matters more than the fund
A fund's ten-year record may belong to three different people. The track record stays on the factsheet; the person who produced it may have left years ago.
So we look at the manager rather than the vehicle:
What do they actually believe? Growth, value, quality, growth-at-a-reasonable-price — every manager has a philosophy, usually stated plainly somewhere. The point is not which one. The point is whether what they say matches what the portfolio shows.
How do they buy and sell? Do they build a position slowly or move quickly? What makes them exit — a price target, a change in the business, or nothing at all? This is where managers differ most and where factsheets say least.
Has the fund outgrown the philosophy? A manager who made their name in smaller companies may find that no longer works once the fund is large enough to move prices. The approach stays the same; the ability to execute it quietly disappears.
When a fund we hold falls
Every portfolio has a bad holding eventually. What happens next is the part that matters.
We do not act on the number. We find out why first — which usually means going to the fund house's product team, the relationship manager, and where possible the manager themselves, and asking directly what changed.
If the answer holds up — the approach is intact and the market is simply not rewarding it right now — we tell you what we learned, in plain words, and we hold. Most underperformance is a style out of season, and selling into that is how investors convert a bad year into a permanent loss.
We consider exiting mainly when the manager changes and the new one does not inspire the same confidence. Even then, nothing moves without your agreement.
This is the least glamorous part of the method and the one that does the most work.
Read a factsheet yourself
Every fund publishes one, monthly, free. Four things to look at:
The top ten holdings, and what share of the fund they are. This tells you how concentrated the fund is. Ten names making up 60% is a very different fund from ten names making up 25%, whatever the category says.
The portfolio metrics. Most factsheets print the portfolio's aggregate P/E, price-to-book and sometimes earnings growth. This is the fund's actual character, and almost nobody reads it.
How long the manager has been there. Usually one line, often near the bottom. Compare it with the period the returns cover. If the manager arrived after the good years, those years are not evidence about this fund.
The riskometer. SEBI requires it and it is reviewed monthly. If it sits higher than you expected, that is worth a conversation before you invest, not after.
Then read the Scheme Information Document at least once. It is long and dull and it tells you what the fund is actually allowed to do, which is often broader than the name suggests.
What this is not
- Not a product. There is nothing to subscribe to. This is how we work with each person.
- Not a fixed model. No two portfolios here are identical, because no two sets of circumstances are.
- Not a recommendation. Nothing here names a scheme or tells you what to buy. It cannot — a fund only becomes suitable once we know your circumstances.
- Not a guarantee. A sound process can still produce a holding that disappoints. Every portfolio on this page can fall in value, including the debt part.
- Not a prediction. Everything described here reads the present and the past. Nothing forecasts a return.
- Not research for sale. This is how we do our own work as a distributor, explained openly.
- Not advice until we have spoken. We cannot know whether any of this suits you until we know your circumstances. That is what the first conversation is for.
Where this starts
Everything on this page follows from one thing we don't know yet: what kind of investor you are.
Find your risk profile — fourteen questions, about four minutes, no sign-up.
Chalamala Revanth | AMFI Registered Mutual Fund Distributor & SIF Distributor | ARN-244686
This page is for general information and investor education. It is not investment advice, an offer, or a recommendation of any scheme. Past performance may or may not be sustained in future. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.