Have You Reviewed Your MF Portfolio and Asset Allocation Amidst the Coronavirus Market Crash?

I elucidated that the equity market crash that happened is due to several key factors and Coronavirus pandemic situation, is one of the reasons.

As seen in the graph below the markets were showing green shoots of recovery from last year after the finance minister proposed tax rate cuts, along with more measures to uplift the dwindling economy. The effect of it was seen when S&P BSE Sensex touched to 61220.86 points on Jan 17, 2020, and on March 16, 2020, the markets crashed to 45885.8 points, a whopping drop of -33%.

The key factors weighing on the Indian equity markets are:

• - Coronavirus pandemic.

• - The sharp drop in oil prices.

• - Talks of global recessions doing the rounds.

• - Fear of inflation-particularly food prices-moving.

• - Central bank turning accommodative and cutting rates do be in line with a global rate cut

• - FIIs pulling out money.

And the recent Yes Bank moratorium as part of reconstruction... is a risk-averse atmosphere.

Remember, market mood swings will always be unpredictable.

And the current situation, especially of the pandemic, is a matter of grave concern coupled with the global growth as major trade is affected. When this unpleasant mood is alleviated remains to be seen.

But as an investor, one should not forget that since equity mutual funds are predominantly investments into the equity markets, they too will have an impact. However, the short-term underperformance should not be a deterrent for your journey of wealth creation.

[Read: Bears Run Loose. But Here Is Why Mid and Small Caps May See the Best Recovery]

Instead, focus long term and review your portfolio periodically. Timely review of the mutual fund schemes is an indispensable part of the journey of wealth creation and accomplishing financial goals.

Review and monitor your portfolio periodically to keep a track on the growth performance of the portfolio before the financial goal/s transpires.

What happens if you do not review your portfolio?

You do not achieve your financial goals.

[Read:  Are These 6 Behavioural Biases Preventing You From Investing?]

Generally, mutual funds are professionally managed by experienced fund managers from reputed fund houses which conduct thorough research and adhere to the best processes and systems.

The performance of a mutual fund scheme is linked to various factors---internal and external.

When you need to review your portfolio, evaluate the schemes to make renewals, rethink your investments based on the performance frequently, and weed out the non-performing ones to replace those with a high probability of good returns after every 6 months or at least a year. In short, you need to keep track of your portfolio.

After all, there are benefits of reviewing your mutual fund portfolio:

1. Helps to spot the weeds or duds that drag the performance of your portfolio down.

2. Will enable you to add a suitable alternative mutual fund scheme.

3. You can add a new scheme that has outperformed than the benchmark and peers across cycles you weren't aware of and may help you accomplish your goals faster.

4. Allows you to optimally restructure your portfolio as per your risk profile, present financial circumstance, and investment time horizon.

5. The portfolio must be aligned to your envisioned financial goals at all times.

"So how should one analyse the performance?" , Mr Sharma interjected.

Consider analysing the performance of your mutual fund investments, not just in the recent past, dig deeper. Try to find out how have they performed over different market phases.

Consistency of your mutual fund portfolio across market cycles plays an important role in your success as an investor.

Inconsistent funds may generate high returns in the bullish phase, but what purpose will it serve, if it can't protect the downside under bearish market conditions?

Don't rush to sell them for their occasional underperformance, only eliminate persistent underperformers.

[Read: Things To Do To Keep Track Of Your Mutual Fund Performance & Investments]

Note that, interestingly, under bearish market conditions, mutual funds find it difficult to outperform Nifty 50; and under bull market conditions, it's hard to outperform Nifty 500.

Primarily, choose worthy schemes only after evaluating the performance of schemes based on qualitative and quantitative parameters to add to your portfolio.

And later, you need to track their performance regularly. Remember every mutual fund comes with its strengths and weaknesses, and it actually depends whether it suits the investors, risk profile, broader investment objectives, financial goals, and the investment horizon before goals are realised, among many other aspects.

So, just as you avoid self-medication and consult a doctor when it comes to your medical health, it is best to approach a Certified Financial Guardian, who can comprehensively review your mutual fund portfolio and provide all the information and recommendations in a 'special customized report'.

A mutual fund portfolio review service will offer a course correction, if needed, and serve in the interest of your financial health and wellbeing. Get your portfolio reviewed today!

Mr Sharma thanked me and returned home a little relaxed.

Conclusion:

An unhealthy portfolio not just stops you from fulfilling your financial goals, but also weakens your financial future.

This reminds us of the wisdom in the adage: "A stitch in time saves nine".

The truth is, NOT all mutual funds are good.

Most importantly, not all mutual funds are good for YOU.

So, timely review of your portfolio to rebalance and realigned can help you accomplish the envisioned financial goals.

Editor's note:  I strongly suggest that you avail of PersonalFN's Mutual Fund Portfolio Review service. PersonalFN's ethical and unbiased investment advisers will comprehensively review your mutual fund portfolio to offer a course correction.

Get recommendations on your existing portfolio of sell/buy/hold, keeping in mind the five points discussed in this article. The portfolio will be revamped based on your requirement and risk profile. 

Get your portfolio reviewed today!

Warm Regards,
Aditi Murkute
Senior Writer