Just like a plant in Garden need regular care to flourish, our portfolio and investments too need periodic review to ensure that they are growing as planned.
A Review is an effective way to know whether we are on the right track. Even the best of plans can go awry due to unforeseen and unavoidable changes in life and circumstances.
Reviewing and rebalancing your investments regularly (at least annually) helps you spot risks, fine-tune your strategy, and make sure you are on track to reach your goals.
This habit helps you to capture market upsides, avoid potential losses and create a sustainable, goal-driven investment journey.
Annual rebalancing helps ensure your investments do not become too concentrated in one area, and it can keep you from being over exposed to market changes.
WHEN TO DO PORTFOLIO / FINANCIAL REVIEW:
1. SIGNIFICANT CHANGE IN LIFE SITUATION:
Suppose there is a SALARY HIKE or Promotion. This affects not only your income positively but also your lifestyle too could see a shift in accordance with the higher income.
This also means that the original Rs.6 crores that you estimated to be enough for your retirement could well short of lifestyle requirements ensuring a higher target.
Even a change in the area where you are living could result in dramatic lifestyle shift, thus needing a portfolio/financial review.
2. EXTREME MARKET VOLATILITY:
Extreme market fluctuations may result in equity losing value bringing down your overall portfolio value. Regular reviews help portfolio safeguard investments against market movements and keep risk under control. For instance, extreme high markets mean equity valuation portion in portfolio might shoot up making it necessary for you to book profits in equities and move to safer options like Gold/Debt. This naturally helps in overall portfolio health.
3. REGULARTORY CHANGES:
Introduction of new guidelines, updates on new features by regulators like SEBI/AMFI/IRDA could leave a lasting impact on your portfolio. Staying informed and reviewing your portfolio helps you ensure it remains compliant and aligned with these regulatory shifts.
4. PERFORMANCE ANALYSIS:
Fund performance varies, and no fund will be always at the top of table or at the bottom of table.
Extremely volatile funds needs to be moved out of portfolio and identifying such funds during review helps in moving to much more stable fund (as needed)
Holding onto poorly performing funds out of habit or hope can hurt your overall returns. Instead, look for funds that better match your financial goals and risk tolerance.
5. TAX EFFICIENCY:
Tax changes are inevitable and unavoidable. These tax changes could significantly impact portfolio by way of higher tax outgo. Regular review help in revealing assets / funds which can benefit you from a tax point of view and help you get more returns.
1. DO NOT CHASE PERFORMANCE
Before jumping in to invest a BIG amount in the recent No.1 Fund... remember the biggest disclaimer
PAST PERFORMANCE MAY NOT BE INDICATIVE OF FUTURE RETURNS.
While this disclaimer is valid for every asset class like Gold, Silver, Real Estate, and Equities...it is more prominent in Mutual Fund performance. Past Performance is like a rear-view mirror showing only what has been rather than where you will be going!
Step back a bit and look at the bigger picture and consider a broader perspective, rather than just the short-term jump.
Investing is a Marathon, Not a Sprint
Ramesh from Mumbai is 40, has a stable job in the finance industry, and is saving for his retirement. When the COVID-19 market crash occurred in 2020, Ramesh’s portfolio took a hit, especially his equity investments in the Nifty 50 and mid-cap funds. However, instead of reacting impulsively, he chose to stay invested in his diversified portfolio. Over the next 18 months, as the market recovered, particularly in sectors like pharmaceuticals and FMCG, his portfolio bounced back and even exceeded its previous highs. This is a testament to the power of staying the course.
The lesson here is clear: Slow and steady wins the race. Building a portfolio that can weather volatility and grow steadily over time is the key to achieving long-term financial goals
Remember, slow and steady wins the race when it comes to achieving your financial goals.
Keep Your Emotions in Check
It's completely natural to feel anxious when the stock market experiences a downturn. However, reacting impulsively—like selling your investments—can be a costly mistake.
Meera, an investor from Bengaluru, had invested in an SIP in an equity fund like HDFC Equity Fund. While the market saw sharp declines, Meera remained focused on her long-term financial goals and didn’t panic. By continuing her SIP and not withdrawing her money, she saw her investments recover quickly as the market rebounded, especially with the growth of sectors like IT and pharmaceuticals.
The key takeaway is this: Stick to your long-term financial plan. If you focus on your goals and remain patient, you can navigate through market fluctuations and achieve all your financial aspirations.
The Importance of Regular Portfolio Reviews
Think of regular portfolio reviews as tending to your financial garden—just like you water and care for plants, you need to nurture and adjust your investments to keep them growing toward your goals. By making it a habit to review and rebalance your portfolio, you're not just hoping for a prosperous financial future; you're actively shaping it.
To build a resilient portfolio, ensure that it has strong foundations. Diversify across asset classes with the right allocations, so it can withstand market storms. When the roots are strong, you won’t feel the need for constant adjustments. That said, regular portfolio reviews and monitoring are absolutely essential.
Remember: Portfolio reviews are necessary, but changes are not always needed.
All the best,
Regards,
Srikanth Matrubai
https://t.me/joinchat/AAAAAELl4KUnaJzi-JJlDg/
