What is a Basket of Mutual Funds? Understanding Curated Portfolios
You've probably heard financial advisors say "don't put all your eggs in one basket." But managing multiple mutual funds individually can be overwhelming. Enter mutual fund baskets - curated combinations of funds designed to work together toward specific investment goals. Let's understand what they are and how they can simplify your investment journey.
What is a Basket of Mutual Funds?
A basket of mutual funds (also called a mutual fund portfolio or smallcase) is a pre-selected combination of multiple mutual fund schemes bundled together based on a specific theme, strategy, or investment objective. Instead of picking individual funds yourself, experts create diversified portfolios that you can invest in with a single click.
How Mutual Fund Baskets Work
- Expert Curation - SEBI-registered investment advisors or research teams select funds based on specific criteria
- Theme-Based Selection - Funds are grouped by goal (retirement, wealth creation), risk level (conservative, aggressive), or asset class mix
- Defined Allocation - Each fund has a specific percentage allocation within the basket
- Regular Rebalancing - Portfolios are reviewed and rebalanced periodically to maintain optimal allocation
- One-Click Investment - You invest in the entire basket at once, and all funds are bought automatically
Types of Mutual Fund Baskets
1. Goal-Based Baskets
- Retirement Portfolio - Mix of equity and debt funds for long-term wealth building
- Child's Education Fund - Growth-focused funds aligned with education timeline
- Wealth Creation - Aggressive equity-focused portfolio for long-term growth
- Regular Income - Debt and hybrid funds for steady returns
2. Risk-Based Baskets
- Conservative - Primarily debt funds with small equity allocation (70:30 debt:equity)
- Balanced - Equal mix of equity and debt (50:50)
- Aggressive - Primarily equity with small debt allocation (80:20 equity:debt)
3. Asset Allocation Baskets
- Equity & Gold - Combines equity funds with gold exposure for diversification
- Equity & Debt - Traditional balanced approach
- Multi-Asset - Equity + Debt + Gold + International funds
Benefits of Mutual Fund Baskets
1. Instant Diversification
With one investment, you get exposure to multiple fund categories - large cap, mid cap, debt, gold - reducing concentration risk.
2. Expert Selection
Funds are selected by professionals who analyze performance, fund manager track record, expense ratios, and consistency. You benefit from their research.
3. Simplified Management
Instead of tracking 5-10 funds individually, you manage one portfolio. Rebalancing suggestions come automatically.
4. Goal Alignment
Baskets are designed for specific goals, so asset allocation matches your investment timeline and risk capacity.
5. Lower Decision Fatigue
No need to research thousands of funds. The hard work of selection and allocation is done for you.
Where to Find Mutual Fund Baskets
Smallcase
The most popular platform offering over 500+ portfolios created by 200+ managers. Supports major brokers including Zerodha, Groww, ICICI Direct, HDFC Securities, and more.
AMC Model Portfolios
Many AMCs like HDFC, ICICI, and Axis offer their own recommended fund combinations on their platforms.
Robo-Advisory Platforms
Platforms like Scripbox, ET Money, and Groww offer goal-based portfolio recommendations.
Financial Advisors
SEBI-registered investment advisors create customized baskets based on your specific situation.
Example: A Balanced Mutual Fund Basket
| Fund Category | Allocation | Purpose |
|---|---|---|
| Large Cap Equity Fund | 30% | Stability and steady growth |
| Flexi Cap Equity Fund | 20% | Flexibility across market caps |
| Mid Cap Equity Fund | 15% | Higher growth potential |
| Corporate Bond Fund | 20% | Stability and income |
| Gold Fund | 10% | Hedge against volatility |
| Liquid Fund | 5% | Emergency liquidity |
Costs Involved
- Fund Expense Ratios - Each underlying fund charges its regular expense ratio
- Platform Fees - Some platforms charge subscription fees (Rs 100-500/month) or one-time fees per basket
- Rebalancing Costs - When you rebalance, exit loads may apply on funds sold
Tip: Choose direct plan baskets to save on distributor commissions.
Who Should Invest in Mutual Fund Baskets?
Ideal for:
- Beginners who don't know how to select funds
- Busy professionals who lack time for research
- Investors who want diversification but don't want to manage multiple funds
- Those who prefer goal-based investing
May not be ideal for:
- Experienced investors who prefer picking their own funds
- Those who want full control over every investment decision
- Investors with very specific requirements not covered by available baskets
How Many Funds Do You Actually Need?
Most experts suggest that an average investor doesn't need more than 4-6 mutual fund schemes. Beyond that, you're likely over-diversifying, which can:
- Lead to overlapping holdings across funds
- Dilute returns by averaging out performance
- Make tracking and rebalancing complex
A well-designed basket with 4-6 funds can achieve adequate diversification.
Rebalancing Your Basket
Market movements cause your original allocation to drift. For example, if equity outperforms, your 60:40 equity:debt ratio might become 70:30. Rebalancing brings it back to target.
When to rebalance:
- Annually (most common approach)
- When allocation drifts more than 5-10% from target
- After significant market movements
- When your goals or risk profile change
Get Liquidity from Your Mutual Fund Basket
Built a solid mutual fund portfolio but need cash for an emergency? You don't have to dismantle your carefully curated basket.
DhanLAP offers Loan Against Mutual Funds (LAMF) so you can:
- Access funds without selling - Keep your basket intact
- Pledge multiple funds at once - Your entire portfolio can work as collateral
- Maintain your asset allocation - No forced selling of any category
- Quick access - Often same-day disbursement
Final Thoughts
Mutual fund baskets offer a smart, simplified approach to investing. They provide instant diversification, expert curation, and goal alignment without the complexity of managing multiple funds individually. Whether you're a beginner or a busy professional, baskets can help you build wealth systematically.
The key is choosing baskets that align with your risk tolerance, investment horizon, and financial goals. Start with one basket, understand how it works, and gradually build your investment knowledge.
