How frequently should you review your mutual fund portfolio?

Reviewing a portfolio annually is also tax-efficient.

With an improvement in risk appetite and to fetch good returns, many investors have shifted towards investing in mutual funds. However, many people stay invested in mutual funds for the long term and don’t consider the need to review their portfolio from time to time.

Industry experts say, even though most people have started investing in mutual funds, they do not know that they need to review their investments often.

Note that, reviewing a portfolio is not similar to taking a look at your portfolio. While reviewing a portfolio, there are certain parameters that investors need to keep in mind. There are times when investors get disappointed by negative returns on their portfolio, however, what most fail to understand is that might be the time when all equity funds are going down.

Experts suggest investors need to see if there is a change in the variables of the fund or change in the reasons due to which he/she first selected the funds. Usually, a fund is selected due to its performance with respect to its peers and its benchmark, expenses, and performance over a full market cycle. While reviewing, if there is no change in these variables then depending only on negative returns one shouldn’t change their funds.

Additionally, if you had selected a fund that was giving extraordinarily positive returns, that may have not met the other variables, needs to be reviewed separately. Hence, while reviewing your portfolio, you need to be objective and not fall prey to the short-term performance of other funds.

According to experts, one of the most important times that investors’ should review their portfolio is when there is a change in their goals. For instance, if you had started investing for your retirement keeping in mind age 60, but later your goal changes and you wish to retire early at the age of 45 – then you definitely need to adjust your portfolio with the change in circumstances. Also, while reviewing a portfolio the investor should effectively rebalance their portfolio.

Reviewing a portfolio annually is also tax-efficient. If you are not sure about reviewing your portfolio, with rebalances and changes in goals, it is better to take the help of a financial advisor.