Mutual fund portfolio should be reviewed at least once a year

If you are following an asset allocation method for some of these portfolios, you can see if the current asset allocation has deviated significantly from the original allocation


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How frequently should I review my mutual fund portfolio and how should I do it?

—Gagan Parthasarthy

In general, mutual fund portfolios should be reviewed at least once a year. However, certain types of funds, such as sector funds should be reviewed more frequently—say, once in six months or even every quarter. The reason for that is for sector funds, factors such as industry outlook, valuations, regulatory changes, interest rate situations, among other things, could change quickly, impacting the performance of these focused funds.

The method of reviewing a set of mutual fund holdings is quite simple and straightforward. The first task would be to organise the holdings into portfolio groups. These groupings can be based on one or more criteria. For example, you can do it by purpose—all your tax saving funds in one group, all your liquid funds (meant for short-term liquidity) in another group, all your new fund offer (NFO) purchases in a separate group, all your long-term funds in another group, among other things.

Once you are done organising all your holdings into separate groups, you can review each group individually. If you are following an asset allocation method for some of these portfolios, you can see if the current asset allocation has deviated significantly from the original allocation.

If so, you will need to do a re-balancing to bring it back to the intended allocation. If you were doing goal-based investing, then you would need to review if your goal-oriented portfolios are tracking to the target on time.

If you are falling short, it could be for two reasons—either the portfolio is overly conservative in its asset allocation, or the funds are not performing as well as they were expected to.

In either case, you would need to tune the portfolio by changing schemes (either increasing the risk level, or replacing the poor performers).

If you are simply doing general purpose wealth-accumulation investing, then you could simply review fund performances to see if you are still holding good funds that promise to deliver returns that beat inflation and the market. You can also use curated mutual fund lists such as the Mint50 (bit.ly/1TGY5e4) to ensure that the funds in your portfolio(s) hold promise for the future.

I invest in an equity-linked savings scheme (ELSS) fund in my son’s name. Will I get a tax benefit for the same?

—K.Nair

If the folio is held in the name of your son, then you will not get tax deductibility for the investment. Investments in ELSS funds should always be done in the name of the person who is planning to avail tax deductibility. If you would like to invest in your son’s name, you would be better off investing in a portfolio of diversified equity funds for the long term, so that he can be benefited for his education or career-growth needs.

Queries and views at mintmoney@livemint.com

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