Review Your Mutual Fund Portfolio in New Year: It is a wise step to review your mutual fund portfolio with the beginning of the new year. If you review your portfolio properly in time and remove the important deficiencies in it, i.e. make it more fit than before, then it can prove to be a good step for your long term financial planning. This not only helps your investment move in the right direction, but also makes it clear whether your investment is performing well as per your financial goals or not. This is why it is important to assess your portfolio and fine-tune it by comparing it with benchmarks or other schemes.
1. Just looking at NAV is not enough
Many investors are satisfied with just looking at the net asset value (NAV) or past performance of their funds. However, this method is not sufficient. The success of any fund should be assessed on the basis of comparison with its benchmark and other funds in the same category. If your fund is consistently lagging behind its benchmark and other funds, it is time to think about why that fund should be in your portfolio.
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2. Medium to long term perspective is better in equity funds
When investing in equity-based mutual funds, it is better to focus on medium to long term performance. One should not be too worried about short term decline due to market volatility. But if a fund continues to underperform for 3 to 5 years, it may be a sign to change the fund.
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3. Analyze credit quality and risk in debt funds
In case of debt mutual funds, it is not right to focus only on high returns. Instead, investors should also assess the fund’s credit quality, tenure, and interest rate risk management. Selecting a good debt fund can give you stable and risk adjusted returns.
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4. Invest carefully in NFO
Many investors invest in the new fund offer (NFO) because of the low starting price of only Rs 10. But this is not the right approach. Before investing in NFO, one should evaluate the theme, management style and long term prospects of the fund. If the performance of the NFO remains poor even after a year, it may be better to leave it.
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5. Maintain the ratio of equity and debt funds
Investors who manage their investments themselves should review their portfolio every year. While reviewing, make sure that the portfolio is right as per your investment objectives and risk tolerance. If you have kept the ratio of equity and debt funds in your portfolio at 80:20, then you should check from time to time whether this balance is getting disturbed. Also, it is important to maintain diversification in the portfolio and keep in mind the changes in tax related rules.
6. Assessment of investment under the old tax regime
If you come under the old tax regime, then you must meet your investment target under Section 80C before the end of the financial year. Tax saving funds like ELSS not only provide tax benefits but also prove helpful in capital growth in the long term.
7. Do not deviate from the investment goal
It is important for investors to understand that there are ups and downs in the market. Therefore, one should not deviate from one’s investment goals by getting worried due to short-term fluctuations. Regular investments should be continued keeping in mind your long-term investment goals. Only then can the objective of wealth creation be accomplished in the long term.
