Investment Tips on Diwali for Portfolio Cleaning: Cleaning the house during Diwali is a part of our tradition, but have you ever thought that you should also clean your investment portfolio in the same way? Over time, some investments get added to our investment portfolio that are not performing well or have higher risk. This Diwali, if you properly review the investments in your portfolio and organize them in a better way, then this festival will fill your future with light. Here we are giving 10 such tips, which can help you in improving your portfolio.
1. Eliminate poorly performing investments
If there are stocks or mutual funds in your portfolio that are consistently performing poorly, remove them. Such investments reduce portfolio returns and can increase risk.
2. Maintain balance in portfolio
Over time, sometimes the balance of your portfolio changes. For example, if a year ago you had invested 60% in equities, 30% fixed income and 10% in gold, this ratio may change due to growth in equities. Rebalance it so that risk management can be done properly.
3. Reduce the number of mutual funds
Investing in too many mutual funds can make your portfolio complicated and affect your risk profile. If you have multiple funds with similar strategies, keep the better performing fund and eliminate the rest.
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4. Emphasize tax efficient investments
Fixed income investments like fixed deposits and bonds may be less advantageous from tax perspective. Higher taxes are levied on the returns received on these. Instead, invest in debt funds or arbitrage funds, which can give better returns than FDs even after tax.
5. Limit small and midcap investments
Investing in small and midcap segments can provide good returns, but they also involve higher risks. The share of such investments in the portfolio should not exceed 40%. Focus on large cap stocks as they give stable returns.
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6. Do not keep very large amount in fixed deposit
Investing in fixed deposits seems easy, but the returns obtained from them are affected by both tax and inflation, after which the profit from them reduces considerably. If you keep a large amount in fixed deposits, shifting to debt funds may be a better option.
7. Stay away from equities for short term targets
If your financial goals are coming in the next 1-2 years, then investing in equity can be risky. For short term targets, debt instruments like fixed income funds are better.
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8. Review high-risk funds
If you have invested in aggressive mutual funds, ensure that your portfolio remains diversified. Excess of funds can be harmful, so evaluate high risk funds carefully.
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9. Change investments giving low returns
There may be some investments in your portfolio that are consistently performing poorly. Remove these investments and invest in such options which can give better returns as per your goals.
10. Focus on new investments
Simply removing old investments is not enough. Also pay attention to new, more profitable investments. This Diwali, think about investing in gold, real estate or other profitable segments of the market.
