Why a Year-end Portfolio Review Makes Sense Now

Making prudent investments in mutual funds is only half the job done; tracking your investments' performance periodically is equally important. A periodic review of your portfolio helps to make necessary changes to keep the strategic asset allocation in place and keeps investors on track with their envisioned goals.

Though there is no such rule on how frequently you should review your portfolio, it is advisable to review it on a periodic basis (quarterly, semi-annually or annually). In addition to such time-bound reviews, consider reviewing your portfolio in case of some life events, such as a pay hike, job loss, getting married, childbirth, death of a family member, and change in financial goals, etc. External events such as a pandemic, geopolitical crises, wars and recession cause fluctuations in the financial markets and the world of business, which too call for a review of your portfolio.

The core rationale for the review is to assess if the existing investments are delivering in line with your expectations, and if not, then take corrective actions.

Consequently, your mutual fund portfolio requires prudent monitoring, so here's how you can conduct a year-end portfolio review with 'PersonalFN's Mutual Fund Portfolio Review' service, which is a personalised portfolio review service designed to boost the returns of mutual fund investors by reviewing and streamlining their existing mutual fund portfolio.

1. Log on to PersonalFN Mutual Fund Portfolio Review login page and register with your details.

2. Fill in the details for questions asked to evaluate the investor's risk appetite and investment objective.

Here's an example of questions asked to identify the investor's risk profile; this helps review your portfolio accordingly to suggest suitable adjustments.

As you can see, the investor has mentioned the investment objective that the safety of investment is of utmost importance. This defines investor's portfolio risk should be a healthy mix between low and medium risk.

3. Mutual Fund Holding Statement

Further, your existing mutual fund holdings statement will be generated, highlighting the plan & options, the weightage each fund holds in your portfolio, the category & sub-category of the schemes, and the risk each mutual fund investment carries. Here is an example of the holding statement.

4. Historical Performance

A statement of the historical performance track record of your holdings will be generated as below. This includes returns generated from each holding across various market cycles, along with benchmark index returns.

5. Portfolio Characteristics

The portfolio review will also include detailed information of AMC-wise portfolio concentration, category & sub-category wise holdings and the sector-wise allocation your existing portfolio holds.

This will help you analyse that your maximum exposure lies with which fund house, which category large-cap, mid-cap or medium/long term, ultra-short term & short term schemes. If your portfolio is skewed towards diversified funds, sectoral funds, liquid schemes, etc.

This will help you ensure that your portfolio is well-diversified across fund houses and reduce AMC concentration risk. Do note that holding schemes of fund houses with huge Assets under Management (AUM) does not make the mutual portfolio robust or safe. It is not necessary that all schemes of large fund houses will prove to be well-rewarding; you need to evaluate the quantitative and qualitative parameters of the scheme before investing.

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6. Risk Analysis of Your Portfolio

The portfolio review will look after the risk analysis of your overall portfolio; you will be able to identify majority of your funds fall under which risk bracket high/medium or low. This will help you assess if the schemes held in your portfolio are or not in congruence to your risk profile, and if not, you may consider taking timely action to avoid any future losses.

7. Review of Your Asset Allocation

The portfolio review provides detailed information of your portfolio's asset allocation towards various asset classes - Equity, debt, and gold. Below is a calculated asset allocation of an investor. This exhibits how much the investor holds in equity mutual funds and debt mutual funds, while the exposure to gold as an asset class is zero.

Now that you have all the information related to your existing mutual fund portfolio and it's performance. Further, our experts will provide recommendations - Buy, Hold, or Sell your holdings along with the rationale behind them.

Here's an example of the new portfolio recommendations to an investor after a detailed review performed by PersonalFN.

In case if there are any switches - STP, SWPs, etc. a switch analysis too will be performed to help you recognise the cost of switching, future switch date, and many more details.

Further, steps to be taken towards optimising your current portfolio with suggested changes will be given. Here's an example:

In addition, the Mutual Fund Portfolio Review will also provide you with the projected asset allocation based on your risk profile.

The Portfolio Review will even help assess the expense ratio and exit load implications. Here's an example:

No matter how cautiously you choose your investments, there is no assurance of future performance, as market fluctuations influence your portfolio performance. A Year-end portfolio review not only addresses the shortcoming of a portfolio but it makes newer provisions as per your requirements. It helps ensure suitable asset allocation for the upcoming year 2023 to make your portfolio well-diversified and avoid any undue risks.

What are the key benefits an investor receives from a Mutual Fund Portfolio Review?

• It helps to identify and eliminate the underperformers that are dragging down the overall portfolio returns.

• It assists in finding suitable alternative mutual fund schemes backed by thorough research

• A portfolio review facilitates optimal structuring and consolidation of your portfolio

• It makes sure the portfolio is optimally diversified and saves investors' time

• A portfolio review helps to align the portfolio in congruence with your risk to ensure the successful accomplishment of your financial goals

• Mutual Fund Portfolio Review also helps when there is a change in return expectations

• It helps if the portfolio characteristics of the scheme are not up to the mark. For instance, debt schemes, where the quality of debt papers might have been compromised with lower-rated instruments.

• In case the fundamental attributes of the scheme (investment style + strategy) undergo changes, it influences the performance of the scheme positively as well as negatively and thus, a periodic review is crucial.

To conclude...

Keep in mind that reviewing your portfolio periodically, such as the year-end review, will assist you in creating an all-weather portfolio. Thus, given the headwinds in play before the new year 2023 begins, it will be prudent to perform a year-end portfolio review of your mutual fund investments. Remember that the investment decisions to Buy, Hold and Sell the investment instruments in the portfolio should be rational, scientific, and unbiased with thorough research and analysis.

PS: At PersonalFN, we understand that not everyone might have the expertise to review their investment portfolio. I recommend that you enrol for PersonalFN's Mutual Fund Portfolio Review Service. It reviews your existing mutual fund portfolio, helps you correct your past investment mistakes, and suggests the best possible options for you. Read here for more details...

If you wish to perform a 2022 year-end portfolio review, enrol for PersonalFN's Mutual Fund Portfolio Review Service today!

Warm Regards,
Mitali Dhoke
Research Analyst