A major problem with investing in mutual funds or a SIP investment is the lack of systematic planning and strategy to complement these investments. Most of the time, investors collect a lot of schemes over a long duration. For these investors, reviewing their mutual fund portfolios can turn out to be an important aspect of their investment decisions.
Here are some factors to consider for reviewing your mutual fund portfolio:
Type of Fund
The situation of comparing mutual funds was extremely complicated until SEBI came out with the concept of market capitalisation. With its categorisation rules, SEBI asked all the fund houses to carry out a restructuring of their offerings based on this market capitalisation. What was revealed with these rules, were six categories of hybrid funds, 16 debt fund categories, and ten equity fund categories. Funds were also categorised based on the size of the companies involved, into large-cap, mid-cap and small-cap funds. Based on these classifications, you have to keep reviewing where your fund falls into, as a fund can change its category over some time.
Interest in SIP investments has risen in the past few years. Therefore, periodic review of funds become important to avoid falling prey to false projections or market fluctuations. Now that the importance of fund type has been discussed above let’s take a look at the performance of the fund. To check fund performance, you will have to look at the category and the benchmarks. Underperformance should be followed by a closer look, while underperformance for long durations should be followed by a thorough check of the basics. Continual decrease in performance indicates that it’s probably time to switch.
Consolidated Account Statement
Merely using an MF SIP calculator, selecting the right plan, and leaving it to good fortune won’t cut it. Mutual funds need to be reviewed regularly. However, you don’t need to sit and search for all your old mutual fund files. You can get a consolidated account statement online. Check out mutual fund registrar and transfer agencies such as CAMS and Karvy which offer consolidated account statements containing a record of all your mutual fund holdings.
The golden rule for investing in a SIP for a mutual fund is to do things in a disciplined manner and to look at all aspects of the process. Once you’ve had a good look at the above-mentioned aspects of mutual funds, the next thing which can be done is to look at your risk preferences. If you aren’t up for high volatility, you shouldn’t go towards high equity exposure, since equity is exposed to a number of risks. On the other hand, debt is considered safe, but safety can also a risk in the minds of some people. Therefore, your personal risk profiling becomes an integral part of the portfolio review process.
Make a note of all of the factors mentioned above while reviewing your SIP for mutual funds and do not abandon a mutual fund unless you have enough justification for the abandonment.