How to Manage Your Active Mutual Fund Portfolio

Mutual funds are investment vehicles that can help you achieve your immediate and long-term financial goals. However, you won’t be able to take full advantage of the capitalization potential until you make the effort to manage your portfolio responsibly. When it comes to investing, successful people start well, maintain fiscal discipline, and finish strong, all while taking calculated risks. A strong allocation to equity-linked investments can be beneficial for achieving long-term goals like retirement or your children’s education. Along the same lines, fixed income funds can help you achieve short-term goals such as buying a car or building an emergency fund.

When it comes to investing in mutual funds, it’s easy to be overwhelmed and confused by the amount of information freely available on the internet. This is especially true for new investors who simply don’t know where to start. A significant number of investors actively prefer to delegate the management of their capital to a financial advisor. While advisors are helpful and often irreplaceable partners in your financial journey, it’s best for investors to have at least a modicum of knowledge about their own investments; however, this doesn’t necessarily require spending hours poring over massive, confusing spreadsheets.

Investing money in mutual funds is just the beginning of the process. Once you have invested, it is imperative that you monitor its performance. Being aware of how your investment is performing is crucial when deciding whether or not to continue investing (and even investing additional money). If your investment horizon is longer than one year, you don’t have to worry about the performance of the plan on a daily basis; however, it is a good habit to keep an eye on the progress of your investment and be aware of its performance. After all, regular checkups are important for maintaining the health of everything in your life, from your car to your body.

Equity funds are much more sensitive to the ups and downs of the market, while debt funds are more consistent and offer almost guaranteed returns. Limiting yourself to just one type of investment can put your investments at risk. For example, investing only in equity funds can lead to dismal performance during a period of volatility, while investing only in debt funds can prevent you from making the most of market opportunities.

The best strategy is to have a diversified portfolio that is well balanced and appropriate for the level of risk you are comfortable taking.

The following steps can help you manage your active fund portfolio:

Do not stop SIP, use volatile periods to recharge

If you are investing through SIP, you need to increase your investment as the market experiences a crash.

During periods of volatile markets or significant market corrections, such as the one triggered by the COVID-19 outbreak, many investors succumbed to fear and panic, selling their SIPs in hopes of recovering. part of their losses. Remember that when the market is bearish, it presents a great opportunity for fund managers to buy high-quality stocks at a lower cost. You should do the same.

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As a mutual fund investor, you can take advantage of this opportunity by supplementing your Systematic Investment Plan (SIP) with lump sum payments on an incremental basis. This will allow you to average your investment, which will ultimately result in a larger corpus with lower contributions when it matures.

Avoid stagnation by rebalancing your portfolio periodically

Rebalancing a portfolio refers to the process of bringing it back in line with the asset allocation that was originally intended for it. Due to changes in market conditions, the distribution of funds included in your portfolio will change over time. You should analyze it regularly and compare it to market benchmarks and other industry funds. You may also need to rebalance your portfolio if your investment strategies, goals, or level of risk tolerance change over time. It allows you to have a more effective risk management strategy and ensures that the performance of your portfolio is not dependent on a particular fund type or asset class.

Quit underachievers who are consistently underachieving

Periodic reassessment can help you weed out funds that are chronically underperforming and not contributing to the growth of your portfolio. However, you should not judge the fund’s performance based on a single year’s results. Try to analyze past performance against a peer group and other benchmarks over rolling periods of one to ten years. However, if a fund consistently underperforms its benchmark or funds in its category, you should seriously consider selling it as soon as possible.

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Keep track of your MF investments using the fund fact sheet

A fund fact sheet helps investors stay informed and up-to-date on the most important aspects of their funds. These snippets are ideal as a starting point for an uninformed investor, as they have a simple structure and focus on easy-to-understand items. A fact sheet is a one to three page document that outlines the fund’s investment objective, risk level, costs, past performance and holdings details.

You can also download the InvestOnline.in app on your mobile device. You will have the ability to easily compare various funds, receive timely notifications, investigate the full features of each fund, and much more. The mobile application provides a wealth of data with a single click.

(By Abhinav Angirish, Founder, Investonline.in)

Disclaimer: This is the personal opinion of the author. Readers are encouraged to consult their financial planner before using an app or making an investment.

Dolores W. Simon