How to check your mutual fund portfolio and maximize profits?

Strategist by Saurav Basu, Director – Wealth Management, Tata Capital

To evaluate a mutual fund portfolio, one should ensure that the portfolio aligns with financial goals and is diversified across asset classes. A well-diversified portfolio has the potential to generate optimal returns with lower volatility over a longer period of time. In overall mutual fund allocation, it is imperative to monitor the program’s performance over a longer period of time to assess whether the fund is consistently outperforming benchmarks, portfolio averages, and can distribute appropriately. match the expected return or not. Evaluation of funds should be done periodically, and reallocation/rebalancing should be done if the fund is underperforming.

To evaluate a fund, one should consider point-by-point returns over a 2-3 year holding period along with the fund’s rolling return. In addition to return, investors should also look at risk ratios to gauge a fund’s risk-adjusted performance. Some ratios commonly used to assess mutual fund risk are Standard Deviation, Sharpe Ratio, and Beta.

Investors should also consider the tax implications of their mutual fund portfolio, which can help maximize overall returns.

Strategy by CA Manish P. Hingar, Founder at Fintoo

To assess the health of your Mutual Fund Portfolio, compare the returns of the programs in your mutual fund portfolio with the returns of benchmarks and other mutual fund programs in the same portfolio. Don’t over-diversify your mutual fund portfolio as it becomes difficult to manage and track them.

To maximize your mutual fund portfolio return, make sure you follow four checkpoints:

1. Align your investments with your goals and according to the age of the target, i.e. your investment horizon and risk appetite, choose which mutual fund schemes are good or bad for you and your investment portfolio.

2. Check if you are overexposed to a particular underlying asset and if so, diversify your portfolio across different sectors.

3. Check the costs you’re paying for your mutual fund programs, as a higher TER can eat away at your returns in the long run.

4. You should review your mutual fund portfolio at least every six months for the Debt MF portfolio and every 3 months for the Equity MF portfolio. You may consider switching to better programs if there are any consistent lags in your portfolio.

Strategist by Mr. Arun Kumar, Head of Research, India Foundation

* Avoid Equity if time frame is less than 3 years – Allocation 100% Debt Fund

* Up to 30% stake if time frame is 3-5 years

* 30-70% in Equity if time frame is greater than 5 years

* Gold can be kept at 10-15% of total portfolio

* Choose good quality equity funds with a long track record of consistent performance and experienced fund managers

* For Debt, stick with high credit quality funds with shorter maturities

* Rebalance the annual asset allocation mix if it deviates more than +/- 5%

In the above context, the appropriate allocation to stocks can be decided based on your ability to tolerate intermittent declines. A temporary drop of 15-25% once a year should be considered, the normal behavior of stocks. Historically, once in 7-10 years a temporary drop of 30-60% would be part of the expectation. Based on the expectations above and how much short-term decline you’re willing to endure, you can make a general decision about your equity allocation. Once you execute this combination properly, this single decision will largely determine 80-90% of your investment results.

Strategy by Nitin Rao, Head Products and Proposition, Epsilon Money Mart

One should review one’s portfolio periodically or post any market events. An investment portfolio should be organized according to your risk appetite and financial goals. Many times, we have seen investors copy others. But in the long run, it does not bode well. An appropriate balance should be made between risk and return. In addition, the mutual fund program should align with your financial goals. Simply choosing a fund because it has delivered great returns in the past may be unwise as there is no guarantee that the same fund will be replicated in the future. Asset allocation is another important tool that should be implemented.

Strategy by Praneet Battina, Investment Team, Fi Money

1. Why evaluate a mutual fund portfolio or why monitor investment performance?

While past performance is no guarantee of future success, it does provide an assessment of a fund manager’s past successes or failures and an opportunity to understand their investment philosophy. . Screening funds before in-depth analysis is a good starting point. Tracking performance can also help rebalance a portfolio over time.

2. How often to evaluate the performance of the MF?

In general, annual performance reviews are recommended as it can help rebalance one’s portfolio over time. Adhoc performance evaluation can be useful when there is significant underperformance or underperformance against peer group or comparable benchmarks, which can also trigger rebalancing.

3. What are the financial ratios to look for when evaluating the fund’s performance?

An important factor to consider when analyzing funds is the consistency of returns to understand whether a fund manager has outperformed their peer group during market cycles. You can do this by looking at the information ratio (IR). Five-year IR greater than 0.5 is usually an indication of consistently high performance. You should be looking at rolling earnings instead of tracking earnings. You should also evaluate the fund based on stock-picking skills and portfolio variance, which can be measured by Jensen’s Alpha (higher is better) and R2 (lower means more difference). ).

While this is a simplification of the mutual fund portfolio analysis process, it is the minimum filtering that investors must perform when choosing a fund on their own.

As a next step, you can try to better understand the fund’s investment strategy by breaking down your portfolio by sections, based on the top 10 stocks, sector bets or market cap bets, in case equity investment portfolio. For debt funds, you can drill down on credit risk and position your portfolio’s yield curve.

Disclaimer: The views and recommendations expressed above are those of individual analysts or brokerage firms, not those of Mint.

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