An investment portfolio is the collection of all the assets you have invested in. This could range from stocks,
bonds, gold, money market instruments and so on. Investing in these instruments is just the start of the investment
journey. External factors are constantly impacting the value of your assets which is why your portfolio never
remains static. Changes in the market conditions such as fluctuations in the interest rates, recession or other
political factors like change in regulations, etc. can all impact your investment portfolio.
For example, if the equity market is doing well, then the value of your equity investments, whether stocks or mutual funds, might increase. This could tip the proportions of your assets and make your portfolio more equity-heavy. The reverse is also true for when the equity markets are showing a downturn, the proportions of assets could shift in favour of debt or other instruments.
Here’s what you can look at:
• Has the proportion of assets changed because of market conditions? If you had a 65%-35%, equity to debt ratio which is now at 75%-25%, your portfolio could be exposed to a very high risk than what suits your risk appetite. At this point you could rebalance your portfolio by selling some equity and buying more debt.
• Are there schemes that are consistently underperforming? Schemes that have underperformed in comparison to the benchmark index for over two years might not be worth holding on to. You could redeem your investment in these schemes and reinvest the amount in better performing assets. However, note that the past performance of a scheme is not an indicator of its future performance and therefore, do not consider this as a rule of investment. If you believe that the scheme suits your goals, risk appetite and investment horizon, you may stay invested in the scheme over a longer period.
• Has your debt proportion increased to a point where you could be losing out on potential inflation beating returns from equity? This too could be a cause to rebalance your portfolio and redeem some debt investments to reinvest in equity.
Monitoring your portfolio also helps you to notice if certain assets are not serving the purpose that you hoped for. For example, gold is usually considered to act as a hedge against inflation. However, if the price of gold keeps dropping as well, then you might need to reconsider your investment approach.
You could monitor your investment portfolio and take a good look at it, time to time. And as a small tip for you: If you feel that your portfolio has most exposure to a single asset, it could be time for you to invest in other assets or mutual fund schemes that might help you diversify your portfolio. Investing in hybrid schemes could be one good way of diversifying your portfolio across various asset classes.
An investor education initiative by ICICI Prudential Mutual Fund
Visit www.icicipruamc.com/note to know more about the process to complete a one-time Know Your Customer (KYC)requirement to invest in Mutual Funds. Investors should only deal with registered Mutual Funds, details of which can be verified on the SEBI website (http://www.sebi.gov.in/intermediaries.html). For any queries, complaints & grievance redressal, investors may reach out to the AMCs and / or Investor Relations Officers. Additionally, investors may also lodge complaints on https://scores.gov.in if they are unsatisfied with the resolutions given by AMCs. SCORES portal facilitates you to lodge your complaint online with SEBI and subsequently view its status.(http://www.icicipruamc.com/note)
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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