Its Time To Fine-Tune Your Portfolio

Hemant Rustagi
Chief Executive Officer, Wiseinvest Pvt Ltd.

Considering the complexities of the financial markets, you must invest judiciously and follow an investment process and be in control of it at all times. The other important aspect is to adopt an appropriate investment strategy so as to tackle different challenges during your defined time horizon. This will ensure that you don’t abandon your long-term investment plan when faced with unfavourable market conditions. Monitoring of portfolio too plays an important role in achieving the desired results. Therefore, you must carry out a detailed analysis of the portfolio once a year. This can be done at the start of a calendar year.

Although there is no significance of a new year in the review and investment process, it helps if you maintain the discipline of reviewing the portfolio at a fixed interval. If you want to be in control of your portfolio and would want to achieve investment success on a sustained basis, let the start of the year 2022 be a turning point in this direction. Here is what you need to do:

1) Begin the process by focusing on risk management. Review your life insurance and make sure that you are adequately insured. Most investors in our country often make the mistake of either ignoring this important aspect of financial planning or choosing traditional products that are investment cum insurance products. In fact, many of them end up accumulating a number of polices. Remember, it’s not the number of policies but the quantum of risk cover that should matter to you. A term insurance plan is an ideal product to reduce your costs and to ensure adequate risk cover. Also, make sure that you have adequate health insurance cover. Creating an emergency fund will allow you to continue your investment without any interruption even when you are faced with any financial exigency.

2) On the investment front, take a close look at your existing asset allocation. Considering that a significant part of your Hemant RustagiChief Executive Officer, Wiseinvest Pvt Ltd. It’s Time To Fine-Tune Your Portfolio portfolio growth comes from asset allocation, the key is to have an asset allocation that can create the right balance between risk and reward. Therefore, if your asset allocation is either too aggressive or conservative, it’s time to rebalance it. The right way to do so is to align your asset allocation in line with time horizon for varied goals to be achieved over different time horizons.

3) If you have a mutual fund portfolio, ensure that you do not have too many funds. Remember, over- diversification in your portfolio can affect overall performance in a negative way, as monitoring its progress becomes a tedious process. Remember, mutual funds are a diversified investment vehicle and hence the right way to invest in them is to choose a few quality funds that suit your requirements rather than investing in every fund that comes your way.

4) If you haven’t planned your investments for saving taxes so far, you must do it now. Remember, it pays to make tax savings an integral part of your overall investment plan. Besides, while planning your tax-saving investments, you must consider the amount committed towards options such as Provident Fund, insurance premium, housing loan repayment and then decide the amount that can be invested in other options such as Public Provident Fund, Equity-Linked Tax Savings Schemes, National Savings Certificate, etc. Allocation to these options should be in line with your overall asset allocation.

5) If you have been investing in equity funds through SIP on and off, it’s time to invest with a clearly defined time horizon. Remember, the more time you give your equity investments to grow, the more you benefit from its true potential as well as the power of compounding. Moreover, investing systematically over a longer term will help you in tackling volatility as well as benefit from averaging