Investment in mutual funds is not as straightforward as it appears to be. If an investment decision is unplanned and ad hoc, it often leads investors to choose the wrong products and thus results in poor outcomes. This may entail taking a hit on the invested amount. In general, an investment mistake is a selection of an outright wrong product, a mismatch in the investment horizon required by the product and that is available to the investor, fund commitment towards the product, and most importantly, underestimation of the risk involved.

Recently, my older brother and I had a discussion about his mutual fund investment portfolio. He said, “I chose a couple of mutual funds based on the information I received from my colleagues. They told me that they had been making SIP investments in these particular mutual funds, and the returns had been very favourable. This happened a few years ago; however, two of those suggested mutual fund schemes have been underperforming consistently for the past 3 years. Now, I am in a dilemma between keeping these funds in my portfolio and getting rid of them. What do you suggest?”

[Read: Are You Investing in the Right Mutual Funds? Think again!]

Mutual Fund investment allows you to invest in various asset classes as per the risk profile, as each asset has risk-related returns and depending on your current financial situation or the dynamic market conditions, the asset allocation strategy may differ. In order to increase your wealth and generate better inflation-adjusted returns, you should invest wisely in mutual funds based on your suitability.

Now, after realising that your portfolio may hold mutual funds that are not working towards achieving your goals or creating wealth as you desire and can even cause you financial distress, it becomes a challenging task to pull out those investments. It is common to get caught up in a dilemma as to whether you should stay invested for the duration of the investment or you should pull out all at once. In case of equity mutual funds, eliminating your investments could be more difficult because doing so may increase the possibility of losses if the market is turbulent at the moment.

Many investors continue to stay invested in underperforming schemes either out of lethargy or in the expectation that underperforming schemes would turn around. Investors must shed this attitude since it negatively affects their portfolio performance. Regular investing is simply one component of wealth creation; the most important component is investment monitoring. For this reason, creating long-term wealth requires periodic portfolio reviews and taking remedial actions.

However, how can one spot the incorrect mutual funds in their portfolio? Should a fund’s performance be compared to its benchmark or to the average for its category? This becomes a challenging task for investors.

Here’s a solution on how you can fix the wrong investments you may have made in mutual funds:

Mutual Fund Portfolio Review

Mutual Funds are frequently recommended as the go-to investment option for achieving a variety of financial goals. Although your circumstances may vary, market fluctuations and highly volatile economic downturns have a direct impact on your investments. Therefore, it makes sense for you to review your mutual fund portfolio periodically.

A mutual fund portfolio review helps you, the investor, evaluate your current mutual fund investments, fix any prior investing mistakes, and recommend you possibly the best options suitable for you. There is no set rule for how often you should assess your portfolio, although it is recommended that you do it periodically (quarterly, semi-annually, or annually). The main goal of the assessment is to determine whether the current investments are meeting your expectations and, if not, to make necessary adjustments.

Not everyone might have the expertise to review their mutual fund investment portfolio, which is why I recommend you to enrol for PersonalFN’s Mutual Fund Portfolio Review Service. This is a personalised one-time portfolio review service designed to boost the returns of mutual fund investors by assessing and streamlining their existing mutual fund portfolio.

Now all you have to do is simply log on to PersonalFN Mutual Fund Portfolio Review login page and register with your details. Further, you will be connected with PersonalFN’s SEBI registered investment advisors, and they will guide you accordingly.

[Read : Why a Year-end Portfolio Review Makes Sense Now]

PersonalFN’s Mutual Fund Portfolio Review Service Provides You With:

  • Evaluation of your risk profile and investment objectives.

  • It will review your existing mutual fund portfolio and provide a holding statement that exhibits a historical performance track record.

  • Analyse your overall portfolio risk, and provide information regarding mutual fund category & sub-category wise holdings, AMC-wise concentration and the sector-wise allocation that your existing portfolio holds.

  • Provides detailed information on your portfolio's asset allocation strategy (Equity, debt, and gold).

  • Further, the experts will provide you with research-backed recommendations, i.e., Buy, Hold, or Sell on your portfolio holdings, along with their rationale.

  • It will help you consolidate your mutual fund portfolio with a projected asset allocation based on your risk profile and action plan for fresh investments. The portfolio review will help assess the expense ratio and exit load implications. 

Considering the current market uncertainties, there is no assurance of future returns on your investments, as market turbulence affects the performance of your portfolio. Therefore, it becomes crucial for every mutual fund investor periodically review their portfolio. It aids in locating and getting rid of the underperformers that are reducing the portfolio’s overall value.

The portfolio review will assist you in finding suitable alternative mutual fund schemes backed by thorough research. Ultimately, a portfolio review serves to set the portfolio’s risk exposure in line with your risk tolerance to enable the successful achievement of your financial goals.

To conclude…

As important as it is to invest in worthy mutual fund schemes that align with your financial goals, it is equally important to review your mutual funds portfolio periodically. It is crucial to remember that volatility is a necessary component of investing; it is impossible to anticipate with certainty where the market will go next. You should therefore concentrate on investing in mutual funds that advance your financial objectives rather than responding to market swings. Build a mutual fund portfolio that is appropriate for your risk profile and remains robust during several market phases.

This article first appeared on PersonalFN here

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