Strategies to optimise your MF returns

People often feel that the returns that they got from their mutual fund investment are not in line with what the mutual fund has delivered. This difference in returns can be explained by the behavioural bias of an investor. Being humans, we are emotional creature and carry emotions such as anxiety, sadness, happiness, fear, greed, anger, etc. And these emotions govern our decisions in everyday life. Hence, having control over them is the key to success, not just in life but also with your investments. Though it is a difficult task and that is the reason one hires financial advisor to make rational decisions on behalf of you. Having said that, in this article, we would discuss a few strategies that you should implement to get optimal returns from your MF investments.

Diversification

Diversification is one of the best tools to manage your investment risk. Diversification helps you to avoid the risk of dependency and concentration in a single asset or fund. Diversification is nothing but, distributing your investments across different asset classes such as equity, debt, gold, etc. Further, it can be divided among various sub-categories of these broader asset classes. Not just that, even it is important to diversify among different fund houses.

Active management

If wealth creation is what you are looking at, then actively managing your portfolio makes more sense than passive management. This is for the simple fact that, while passive management means sticking with the pre-determined asset allocation even if the markets tumble, active management changes the asset allocation itself. Therefore, for wealth creation actively managing your MF portfolio would be wise.

Review

This is where most of the people fail. Reviewing is very crucial. This is because when you invest in a fund, the thought process and market dynamics can be different from what it is now. Hence, reviewing your MF portfolio is important. This will help you to have a timely exit from the fund before it witnesses a deep cut in returns. Reviewing activity also helps you to re-align your portfolio as per your financial goals.