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You don’t need to monitor your fund daily, but you have to monitor it periodically

LiveMint logoLiveMint 16-08-2017 Kayezad E. Adajania

Churning is bad for our money box because if we do not give our investments time to grow, we end up with low returns or, worse, losing money. That doesn’t mean we shouldn’t review portfolios. Many financial advisers and distributors insist on an annual review and meeting the clients two-three times a year (on phone) to keep abreast of what’s going on with you and your money. You don’t need to look at your portfolio regularly, but here is why you should review it periodically.

At the start of a financial plan, you typically list out the goals to say why do you want to invest your money. Usually, you list out goals such as retirement, kids’ education, and buying a house or a car.

Based on these answers, your adviser and you get down to decide your monthly investments—hopefully through a systematic investment plan (SIP). A periodic review helps you to ensure that you are on track with your investments and goals. Over time, it’s good to know how far, or near, you are away from your goal. Periodic reviews also help in checking your asset allocation; for instance, if you are too near the goal, your adviser may suggest shifting to less volatile funds like a low-risk debt funds. Adding goals also call for a review, as you would then either allocate more money every month or cut back on your spending habits or perhaps even trim your SIPs that you had earmarked for other goals.

We all aspire to earn more as time goes by. Salaried individuals usually get an annual increment, while professionals can often see spurts in their income. A periodic review helps you assess how much more you can invest every month. Many mutual fund houses allow you to increase your SIP instalment amounts once or even twice a year. Most funds, though, mandate you to predetermine at the start how much more you would like to increase your investment every year, say, Rs1,000 or 10%. If you are a professional, periodic reviews help you to channelize your money into investments periodically.

Investments in equity mutual funds are for the long run, and need time to grow. But a periodic review helps identify a consistently poor performer. Ask your adviser why the fund is not doing well. Perhaps the segment in which it works, is doing badly. Or perhaps it may have taken one or more bad calls. Whatever the reason, you need to know.

Sometimes, fund managers leave. Periodic reviews help you decide if a new manager taking over is reason enough for you to look elsewhere. Of course, you need not wait for a review meeting to take place to make changes in your portfolio. Today your mutual fund investments are paperless and online, once you enrol. But periodic reviews help you take a comprehensive stock of what’s going on.

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