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Time to re-look your investment portfolio

Many analysts believe that one should re-look at their investment portfolio once in a year or even twice or thrice depending upon the motive of investment which can be short term, medium term, or long term. We will guide you to whether one should re-look at their investment portfolio or book profits or should hold their investments.

Sarabjeet Kaur Written by: Sarabjeet Kaur New Delhi Published on: March 13, 2021 7:00 IST
personal finance, investments, market, market investments, investment portfolio, mutual funds, stock
Image Source : PTI

Time to re-look your investment portfolio

Post COVID-19 markets touched all time high and investors got a chance to allocate more in the equity stock markets. But is this the only solution to make money or one really need to re-look at their investment portfolio? Well, many analysts believe that one should re-look at their investment portfolio once in a year or even twice or thrice depending upon the motive of investment which can be short term, medium term, or long term. We will guide you to whether one should re-look at their investment portfolio or book profits or should hold their investments.

Review Your Investments:

It is mostly suggested that one should review their investment portfolio at least once in a year or twice a year. Always follow some general rule while reviewing your portfolio by keeping the structure and objective of your portfolio in mind.

Do not just change your investments strategy because of volatile markets. If you have long term goals and invested your money in some good fundamental stocks, mutual funds or bonds or any other asset class then stick to your portfolio after calculating the profit you gained and evaluate the future of the asset class you invested.

According to Dr. Joseph Thomas, Head of Research - Emkay Wealth Management- “It is important to understand where exactly one stands in terms of the investments already done. Second, there may be profit booking opportunities to be availed of. Third, there may be bad apples which need to be weeded out if the portfolio to enhance the returns. Fourth, there are new products which could be made a part of the portfolio. Finally, one may like to review the tax efficiency of the investments.”

If, your investment is diversified then you need to evaluate sectoral performance one by one. Frequent review of your investments is always much better option for investors.

Always check how your investment performed when there is a selloff in the markets.

Do check the profit and loss of the investment asset class during heavy volatility along with sector specific news.

Stay With Asset Allocation:

One should always stick to the original asset allocation after risk profiling exercise.

“It is common knowledge that markets may move up and down from time to time based on the cyclicality of economic phenomena. This may give opportunities to enhance allocations to specific asset classes or sub-asset classes while bringing down certain other allocations. This is called tactical allocation”, opines Thomas. 

But this may be attempted in portfolios with utmost care and caution with the objective of enhancing portfolio performance.

According to Aasif Iqbal, Head-Research, Escort Securities- “While doing asset allocation, one should keep invested in Equity Market. At least 30-40% of the investment should be in Equity for better return. It is better to invest through mutual fund and do SIP. Balance Fund and Growth Fund is good for investment.”

But the most important thing in asset allocation is that - when the portfolio was initially set up there were some basic goals and objectives which it was going to achieve or satisfy. So, keep that in mind and then invest.

 
“To what extent the portfolio is currently in alignment with those objectives and goals, is something that needs to be examined. If there is any concern on that count, the portfolio may require some rectification action”, also adds Thomas.

If you are happy with the current asset allocation of your portfolio then it would be better to stick to it. Always check your risk-taking capability before investing.

Try to diversify your investment portfolio in such a manner that you can get the gains and profit accordingly. Invest at least 30-40 percent in good fundamentally strong equity stocks or mutual funds SIPs, around 20 per cent in bank FDs.

At least 20 percent invest in real estate, 20 per cent in debt and rest 10 percent of your allocation in gold. 

Better to avoid lump sum investment in your portfolio. Especially, when you try to invest through mutual funds in SIPs. If the markets fall or correct, then you may face heavy loss all together in your portfolio. So, its better that you invest your money through STPs which is systematic transfer plans. Which means you can transfer your funds from one to another like from equity to debt fund according to the market conditions.

Also, its better to look at multi-asset funds or go for mixed index fund.

“If someone has time and inclination to learn about the market, he or she can directly invest in Equity Market. It is my advise to Buy Quality Stock and Good Management companies. It better to Invest in companies as SIP. This will even out the price fluctuation” says Iqbal.

Things to Keep in Mind:

If you find any of the asset class or stock or fund not giving good returns to you in regular interval of time, then sell that asset class and invest in good asset class after checking all fundamentals, risk and returns. 

Do not put all your money in one basket. Which means do not invest all your money in on asset class.

If you think any equity shares which is not giving good returns to you then, you must sell that stock and buy blue-chip companies as an investment.

Bottom line is- list down your financial goals, talk to your financial advisor, assess your investment risk and investment time horizon, invest in a suitable mix of asset class, and build a strong investment portfolio to get good returns.

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