How often must you review your Mutual Funds Portfolio?

If you are in your youth and earning handsomely, chances are that you have settled in for investing in Equity Mutual Funds that will help you earn good returns rather than park your money in a savings account where you can only earn a pittance in interest. It is good to appreciate the fact that like all other investments, mutual funds are volatile and uncertain. It is a characteristic that is part and parcel of this kind of investment itself.

There are times when you are extremely happy with the way your portfolio is shaping up and the high returns that you are making. You may possibly think that a company which is growing your funds by leaps and bounds is something that you should stick to but in reality, it is not always possible that a company will have the same winning streak year after year. It invariably does take a beating at some point in time. And that is precisely the reason why you must consider reviewing your portfolio often without any prejudices. I am saying this because the mutual funds that you thought were underperforming in your portfolio may at one point in time perform so well that they can leave the hitherto well-performing ones in its shadow!

Here are other good reasons to review your equity mutual funds periodically:

  1. Building a robust portfolio;
  2. Monitoring performances of the various schemes in which one has invested and
  3. In order to be able to make additions or deletions in the portfolio

It is very important to not measure the performance of a particular mutual fund in isolation. The best method that experts recommend is to measure it against its benchmark. The moment you feel that the mutual fund that you are holding is consistently underperforming across the benchmark, it is time to replace it with another better performing one!

Avoiding the temptation of over reviewing:

It is, however, important to state here that one should be wary of reviewing a scheme too close to an upward or a downward movement in the market. One should be able to give the portfolio manager enough time to be able to generate enough funds in the portfolio. There is a consensus among the experts in the field that a period of 18 to 24 months is a good time to review all the investments.

Reviewing is helpful:

The simple exercise of reviewing investments can open your mind to understand the schemes in which the money is invested. Changing schemes definitely helps to check if the investments are in alignment with the person’s short-term and long-term goals.