Now that the New Year has begun, it's time to review your portfolio. Take a look at all of your investments and assess whether they are still meeting your financial goals and risk tolerance.
If not, it may be time to update your investment portfolio by making any necessary changes. This can help ensure that your portfolio is well-diversified and aligned with your long-term financial goals.
Investments in mutual funds need time-bound monitoring to ensure that they help you achieve your financial goals.
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Don't forget to consult with a financial advisor if you have any questions or need guidance on making changes to your portfolio.
Here is what you should know about how to review your portfolio of mutual fund schemes.
Step 1: Assess your financial goals
Start by deciding what you want your investments to achieve. Do you plan to set aside money for retirement, a down payment for a home, or any other long-term goals?
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Knowing your financial goals will help you choose the mutual funds that are best for your portfolio.
If you decide to add a new goal, such as travelling abroad next year, you should consider if it is possible for you to achieve it given your existing financial condition and financial goals.
You can take the following actions to include this new goal in your financial planning:
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Step 2: Evaluate your Risk Tolerance
Assessing your risk tolerance is an important step in managing your investments because it indicates the level of risk you are willing to take with your money.
Your age, financial condition, and level of comfort with market volatility are some factors to take into account when assessing your risk tolerance.
Young investors often have a longer time horizon for their investments, so age is an important factor to keep in mind. They can afford to take more risk since they have more time to recover from any potential losses.
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Investors who are getting closer to retirement may have a shorter time horizon and need to be more cautious to protect their investments.
Another vital consideration is your financial position. You could feel more comfortable taking on more risk with your investments if you have a sizable emergency fund in addition to other income sources.
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On the other side, you might need to be more cautious to safeguard your savings if your investments are your primary source of income.
Your comfort level with market fluctuations is important factor to consider.
Some investors are comfortable with the ups and downs of the market and are willing to take on more risk in order to potentially earn higher returns.
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Some people might be more risk-averse than others and favour investments with more stable returns.
You may assess your risk tolerance and choose the assets that are best for your portfolio by considering these and other factors into account.
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Always be realistic with yourself about your risk appetite and make investment choices that align with your level of comfort and financial goals.
Step 3: Review your Holding
Reviewing your current holdings is an important step in managing your mutual fund portfolio.
When reviewing your current holdings, you should consider several factors, including the broad market conditions, the scheme prospectus, the fund's performance history, and its performance compared to its benchmark.
Broader Market Conditions:
The broader market conditions, such as the overall direction of the stock market, can impact the performance of your mutual funds. It's a good idea to consider current market conditions and how they may affect your investments.
Scheme Prospectus:
The scheme prospectus is a document that provides detailed information about a mutual fund, including its investment goals, risk level, and fees.
Reviewing the scheme prospectus can help you understand the fund's investment strategy and whether it is aligned with your financial goals and risk tolerance.
Fund Performance History:
You can review the fund's past performance to see how it has performed in different market conditions and compare it to other similar category funds.
Performance compare to its Benchmark:
Every mutual funds are benchmarked against a specific index, such as the Nifty 500, to provide a point of comparison for their performance. You can review the fund's performance compared to its benchmark to see how it has performed relative to the overall market. Also check with Category Scheme performance.
“Currently, some Schemes are performing better than their peers, but they may be taking on higher levels of risk in order to achieve these returns. This means that they may be investing in riskier stocks that could potentially lead to significant losses if they perform poorly.
As a result, it's important to carefully review the investments in these funds and consider whether the potential returns are worth the added risk.
Keep in mind that even if a fund is performing well in the short-term, it's important to consider its long-term track record and risk profile before making any investment decisions.”
By considering these & other factors, you can get a better understanding of your mutual fund holdings and make informed decisions about whether they are still aligned with your financial goals & risk tolerance.
Don't forget to consult with a financial advisor if you have any questions or need guidance on managing your mutual fund portfolio.
Step 4: Diversify your Portfolio
Diversifying your mutual fund portfolio is an important way to manage risk and increase your chances of achieving long-term success with your investments.
You can spread your risk across a wide range of investments by investing in a mix of asset classes, sectors. This minimizes the impact of any single investment on your overall portfolio.
Asset classes refer to categories of investments, such as stocks, bonds, and Commodity (Gold, Silver). By investing in a mix of asset classes, you can diversify your portfolio and reduce the impact of any one asset class on your overall returns.
Asset Allocation Excel Calculator
Simple Asset Allocation Excel base calculator
Conclusion
In conclusion, it's important to review and update your mutual fund portfolio on a regular basis to ensure that it is aligned with your financial goals and risk tolerance.
Remember, mutual fund investing carries its own set of risks and it's important to be aware of these before making any investment decisions.
