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How to manage your active mutual fund portfolio


You won’t be able to take advantage of compounding’s full potential until you put in the effort to manage your mutual fund portfolio responsibly.

Mutual funds are investment vehicles that can assist you in meeting both your immediate and long-term financial goals. However, you won’t be able to take advantage of compounding’s full potential until you put in the effort to manage your portfolio responsibly. When it comes to investing, successful people get off to a good start, maintain fiscal discipline, and finish strong—all while taking calculated risks. A robust allocation to equity-linked investments can be beneficial to the achievement of long-term goals like retirement or the education of your children. In a similar vein, fixed-income funds might assist you in accomplishing short-term goals such as purchasing a car or building up an emergency fund.

When it comes to investing in mutual funds, it is easy to become overwhelmed and confused by the amount of information that is freely available on the Internet. This is especially true for new investors who may simply not know where to begin. A significant number of investors actively prefer to delegate the management of their capital to a financial advisor. Though advisors are useful and often irreplaceable partners in your financial journey, it is preferable for investors to have at least a minimum of knowledge about their own investments; however, this does not necessarily require spending hours poring over massive and confusing spreadsheets. 

Investing money into mutual funds is merely the beginning of the process. Once you have invested, it is imperative that you monitor how well it is performing. It is crucial to be aware of the performance of your investment to decide whether or not to continue investing (and even to put in additional money). If your investment horizon is greater than one year, it is not necessary for you to worry about the performance of the plan on a daily basis; however, it is a good habit to keep an eye on the development of your investment and be aware of its performance. After all, regular check-ups are important for maintaining the health of everything in your life, from your car to your body.

Equity funds are far more susceptible to the vicissitudes of the market, whereas debt funds are more consistent and offer returns that are almost guaranteed. Limiting yourself to just one type of investment can put your investments in jeopardy. For instance, investing just in equity funds can lead to a dismal performance during a period of volatility, whilst investing solely in debt funds can prohibit you from making the most of opportunities in the market.

The best strategy is to have a portfolio that is diverse, well-balanced, and matched to the level of risk that you are comfortable with taking.

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

Don’t Stop SIP, Use Volatile Times To Top-up

If you are investing through SIP, you should raise your investment while the market is experiencing a slump.

During times of unstable markets or substantial market corrections, such as the one that was sparked by the COVID-19 epidemic, many investors succumbed to fear and panic, selling their SIPs in the hopes of recouping some of their losses. Remember, when the market is bearish, it presents an excellent opportunity for fund managers to purchase high-quality stocks at lower costs. You should do the same.

As an investor in mutual funds, you can take advantage of this opportunity by topping off your systematic investment plan (SIP) with lump-sum payments in a phased manner. This will make it possible for you to average your investment, which will ultimately result in a larger corpus with smaller contributions when it matures.

Avoid Stagnancy 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. Because of changes in the state of the market, the distribution of funds included within your portfolio will shift over time. You should analyze it on a regular basis and compare it to market benchmarks as well as other funds in the industry. Rebalancing your portfolio may also be required if your investment strategies, objectives, or level of comfort with risk shifts over time. It enables you to have a more effective risk management strategy and ensures that the performance of your portfolio is not dependent on anyone fund type or asset class in particular.

Exit Underperformers That Are Consistently Underperforming

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

Keep Track Of Your MF Investments With The help Of the Fund Fact Sheet

A fund fact sheet enables investors to remain informed and up to date on the most important aspects of their funds. These tidbits of information are ideal as a beginning point for an investor who is not well informed because they have a straightforward structure and have an emphasis on material that is simple to understand. A fact sheet is a one to three-page document that provides insight into the fund’s investment objective, risk level, costs, past performance, and holdings details.

Source : Financial Express

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