Performance, taxes: Why you should review mutual fund portfolio regularly

Investors should avoid impulsive decisions and follow a long-term strategy, according to experts

Mutual fund investments have become popular, especially after campaigns by the industry. However, many new investors overlook the critical practice of regularly reviewing their mutual fund portfolios. Let us understand why it is important to review your mutual fund portfolio regularly.

 

“By reviewing and rebalancing periodically, you correct imbalances, manage risk, and optimise returns. This disciplined approach helps you capture market upsides, avoid potential downsides, and ensures that your investment strategy remains sustainable, fostering a more consistent and goal-oriented investment experience,” said Shrinivas Khanolkar, head – products, marketing and corporate communication at Mirae Asset Investment Managers.

 

Let us understand why reviewing your mutual fund portfolio is important.

 

 

“For example, you have had a salary increase and your lifestyle has levelled up. That is something to factor into your retirement plans too. Maybe five years ago, you thought Rs 5 crore would be enough to retire comfortably but now, with the lifestyle shift, you might need Rs 20 crore. Regular reviews help you see these changes clearly and adjust accordingly,” said Hrishikesh Palve, director at Anand Rathi Wealth Limited.

 

Key factors driving the need for regular reviews

 

Market volatility: The Indian market has witnessed volatility in recent years, influenced by both domestic and global factors. Regular reviews help investors understand how their portfolios are responding to these changes.

Regulatory changes: The Securities and Exchange Board of India regularly introduces new guidelines for mutual fund schemes. Stay updated and ensure their portfolios comply with current regulations.

 

Fund performance analysis: Not all funds consistently maintain their performance. A top-performing fund today might underperform tomorrow. Regular reviews help identify underperforming funds and make informed decisions about whether to continue, redeem, or switch investments.

 

Tax efficiency: Regular portfolio reviews also provide an opportunity to optimise tax implications associated with mutual fund investments.

 

Common mistakes to avoid during portfolio reviews

 

Chasing performance: Making decisions based solely on past performance can be misleading; past results do not guarantee future success.

 

Ignoring fees: High management fees can erode returns over time; it is crucial to consider these costs during reviews.

 

Emotional decision-making: Investors should avoid impulsive decisions driven by fear or greed; sticking to a long-term strategy is vital.