8 Steps to Improve and Strengthen Your Portfolio

02 Jun

The domestic equity market as well as the foreign equity market is losing the steam impacting the portfolios of investors all over, negatively. Even the mutual fund investors are not away from this. Many mutual fund investors have incurred huge losses and are not able to identify the actual reason for such losses. Below mentioned steps will guide to improve and will boost up your portfolio.

Stay invested, even at bad phase of the market is highly recommended by experts. Invest in a well-diversified equity funds having a sound track record. Stay invested for at least a time period of 5 years. New investors can look for SIP’s (Systematic Investment Plan) to start with.

Investors already having a mutual fund portfolio should look out for pros and cons and make necessary alterations if required, in their portfolio to strengthen it. Steps to look out, which can help build up your portfolio.

1) Diversification: Diversify your portfolio across various schemes as well as across varied asset classes. Picking up 5-7 good performing funds having a sound track record and consistent return should be a part of your portfolio. Part exposure into gold and debt schemes is considered better options in comparison to 100 percent exposure in equity.

2) Proper allocation of assets: Decision regarding this should be made keeping in mind your goals, time frame and risk taking capability. Keep a periodical check on it. If it’s highly deviated from the benchmark allocation take immediate measures to correct the same.

3) Avoid investing in similar funds: Avoid sector funds as you may incur huge loss when the sector underperforms. Diversification across varied equity funds is a good option. Avoid investing in multiple schemes with same objective and investment pattern.

4) Avoid NFO’s: Choosing NFO’s for investment, not a wise decision. Fund houses many a times launch NFO’s of similar types already existing, for raising fresh funds. It’s advisable to avoid NFO’s as they do not have any track record.

5) Exit underperforming funds from your portfolio: Exit persistent underperformers as, such type of single fund can bring down the overall profitability of your fund.

6) Stable scheme and return: Don’t just get influenced with schemes that have witnessed high returns on a very short span of time. Pick the schemes on the basis of long term return. Long term performance of at least 3-5 years along with its performance during up trends and down trends should be considered. The fund should have outperformed the benchmark index along with its peers.

7) Part investment in gold and debt schemes: Gold has performed well in the past 3-5 years. Gold ETF are the best option to hold gold. Staying invested with debt funds is also a good option. RBI has proposed trimming down of policy rates after inflation is under control. Choosing both options will strengthen your portfolio.

8 ) Expert advice: Take expert advice to pick the right fund and strengthening your portfolio. The expert should consider both quantitative and qualitative aspect of the fund. Quantitative means, funds past performance and qualitative means, fund is consistent performer and fundamentally strong to outperform in future as well.