This weekend, I met my friend Krishna and he was very keen to get his mutual fund portfolio reviewed. So, I asked him "Why you want to review your mutual fund portfolio?". As expected, his first response was Poor Returns. In my last post, Why Mutual Funds are not doing well? I had shared an article and video of veteran investors discussing on present market conditions and fund managers proactive actions and advice on market scenarios.

mutual fund review


Today we will be discussing on points which I observed and explained Krishna to take care before getting his mutual fund's portfolio review.

6 Points to Remember Before You Review Your Mutual Fund Portfolio

1. Tenure: 

While going through Krishna's portfolio, I realized his first investment was in the ELSS fund. He had done SIP in an ELSS fund from the last 12 months. ELSS funds have a lock-in period of 3 years. So if he plans to move his present funds to any other ELSS fund, he has to wait for the next 3 years. If he keeps switching between ELSS funds every year, his portfolio will be full with a bunch of ELSS funds. 

So, I would personally recommend you to read: How to select the best mutual fund? before selecting any mutual funds, especially ELSS. 

2. Index Funds: 

Index funds are a very crucial part of a long term investment portfolio. Krishna portfolio had a missing component of index investing. So, I explained to him Index Investing and how to make the best use of Index funds in investment. I personally prefer investing through Index ETF. Index Funds Returns, in the last 20 Years - NASDAQ 100 is up +468%, DOW JONES is up +191%, GERMAN DAX is up +163%, S&P500 is up +158% and most surprising is India Sensex return. It is up a whopping +928%.

Index Fund


3. Direct Mutual Funds: 

Krishna's portfolio had all regular funds. TER of direct mutual funds is lower than regular mutual funds. TER (Total Expense Ratio) has a direct bearing on your returns massively through the power of compounding. For example, Rs 1 lakh over 10 years at a rate of 15 percent will grow to Rs 4.05 lakh. But if we consider an additional expense ratio of 1.5 percent, your actual total returns would be Rs 3.55 lakh, nearly 14 percent less compared to direct funds. So, the selection of direct mutual funds over regular mutual funds is very important.

4. TER (Total Expense Ratio):

We have already discussed TER in the above point. But, even in the direct fund, TER keeps on fluctuating and communicated to investors through Change in Base TER (Total Expense Ratio) notice/mail from funds. This change must be keenly checked, to align your investment projections and monitor your return impact. 

5. Change in Mutual Fund scheme name and changes of fundamental attributes: 

Krishna had a multi-cap fund in his portfolio. But he ignored, Notice cum Addendum communication from his fund house, in which they had informed unit holder change in their fundamental attribute from Multi-Cap to Large Cap. Such communication must not be ignored, change in Mutual Fund scheme name and changes of fundamental attributes can have an adverse impact on your investment projection and returns. This might change your overall reason for holding a particular fund.

6. Goal

Last but not least, GOAL.  In investing, the goal is your idea of the future projected return combined with investment strategy and timelines. Before mutual fund portfolio review, check whether your goals are changes. In the case of Krishna, he had a change in goal duration and amount. 

Krishna was very happy after reviewing his mutual fund portfolio and said "Abhi today's food bill is on me" 😃 After all we are Super Foodie 🍲😍

Have you reviewed your mutual fund portfolio yet? 


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