Follow these 4 steps to stay ahead in the financial markets

Portfolio monitoring process involves an annual mutual fund review.

portfolio monitoring process

An annual mutual fund review is among the best things you can do for your investment portfolio. It is essential to conduct this review as you must know what your money is doing and what's working for you. Try to achieve your financial goals through a yearly portfolio analysis. There is no rule of thumb that you must follow for your portfolio analysis. However, an annual analysis is enough for sound financial planning. 

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1. When should investors conduct their mutual fund review?

A yearly mutual fund review is considered to be enough by experts. The underlying reason behind a mutual fund review is to ensure that your investments provide returns in line with your goals. The annual mutual fund review will help you take corrective measures if your investments are not performing well enough. You must also revisit your investment strategy if there is a birth, death, or inheritance. Other events, such as marriage, job loss, and pay hikes, require revisiting your investment strategy as well. External factors such as recession, war, or pandemics also require revised financial planning. 

2. What should you check during your mutual fund portfolio review?

CRISIL reported that multi-cap funds returned 8.30%, large-cap funds lost 1.80%, and short-term debt funds returned 5.90% in the last year. It does not mean you take out funds from one place and put them in another. It would be best if you mixed your investment portfolio and kept it in line with the financial markets' general trend. Sound financial advice will be to book profits if your equities outperform and buy undervalued stocks. Gold investments give poor returns when the stock market rallies. It would be best if you did not sell gold during this time and booked profits by selling equities instead. Sound financial planning involves checking other benchmarks to see how your mutual fund has performed compared to them. While there might be underperformance, taking hurried corrective measures is not a good idea. 

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3. How to Rebalance your mutual fund portfolio? 

The portfolio monitoring process involves rebalancing. Sell the outperforming asset and purchase the underperformers. You can rebalance your portfolio this way. If you feel so, you can also rebalance the amounts you have invested in large, small, and mid-caps. For example, you can sell outperforming large-cap stocks and purchase underperforming small-caps (if the situation is so). Selling outperformers and buying underperformers is the best way to allocate your finances and leads to sound financial planning. 

4. How to Take Corrective Measures while rebalancing your mutual fund portfolio?

Your investment portfolio might include systematic transfer plans (STPs). You invest a lumpsum in liquid funds and transfer equally small amounts in equity funds. When transferring your corpus to the equity fund, you might have residual units left in the liquid fund. It is because the liquid fund can grow in the meantime. You can transfer such residual units into your equity fund and shut down your liquid fund. Your investment portfolio might also have age-old assets that you might have forgotten about. You can check your overall portfolio and cut down the residues. Money is money, in the end. 

Also ReadDirect vs. Regular mutual fund: which one to choose? Why?

Many investors fall prey to the "get rich quick" scheme and face losses rather than earnings in the stock market. Going the mutual fund way is a great way to ensure financial professionals handle your money. Your portfolio monitoring process will only be limited to checking whether your mutual funds are performing well. You can always shift mutual funds if your review suggests. 

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.


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