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How to Review Mutual Fund Portfolio?

Mutual Fund offers returns, but they can also lead to losses. Therefore, wealth cannot be created just by investing in Mutual Funds. For this, you need to be aware of future risks. Also, to avoid future losses, you should review your Mutual Funds. In the previous blog, we gave detailed information about the various instruments available for investing in Mutual Funds. In today's blog, you will get detailed information on how to review your Mutual Fund Portfolio.

The important concepts of Mutual Fund portfolio review are as follows:

1.Investment Goals:

Before making any investment decision in a Mutual Fund, it is important to decide the objectives in which fund you want to invest, how much you to invest, or what your risk appetite is etc. Along with this, the period for which you invest is also important.

2.Comparison with other Mutual Funds: 

You can compare your Mutual Fund portfolio with other funds to review your fund's performance, which will help you understand which fund is suitable for you.

3.Comparison with Benchmark Index:

Comparing with the benchmark is also the best option. Suppose you have invested in an Equity Mutual Fund, and the NIFTY 50 Index will be considered as the benchmark index for that fund. There are Large Cap, Mid Cap and Small Cap mutual funds. And there are also benchmark indices for the same.

4.Sharpe Ratio or Risk-Adjusted Return:

In the process, a balance is achieved according to risk and volatility in Mutual Fund investments. The returns received thereon are considered Risk-Adjusted Returns. You can use the Sharpe Ratio of various funds to review your funds.

5.Expense Ratio:

Expense Ratio is an important ratio to review Mutual Funds. Before starting an investment, it is important to check the Expense Ratio as per the investment plan. The Expense Ratio of actively managed funds is comparatively higher. Therefore, this fund may be more expensive for you or may give less returns. Or the investments made in the fund are made with the help of the fund manager. Therefore the expense ratio of the fund is higher.

6.Lock-In Period in Mutual Funds:

In some funds, there is a lock-in period for some period and you cannot withdraw your investment. Ex. You need to have 12 months of investment in the ELSS fund. These rules vary depending on the type of Mutual Fund. You can choose your fund accordingly.

7.Risks related to Mutual Funds:

Every Mutual Fund has different types of risks depending on its type. It is also classified accordingly. Among equity Funds, Small Cap Funds are the most risky funds, whereas Debt Funds and Hybrid Funds are relatively less risky.

8.Taxes and Fees:

The most important concept to consider when reviewing a Mutual Fund portfolio is the taxes and miscellaneous expenses or fees charged on it. All Mutual Funds collect various taxes and fees depending on the type. Some funds may also have hidden costs. STTG and LTGT are taken away by the government like Mutual Funds. These are the various methods used to review the Mutual Fund portfolio.

Conclusion:

Wealth is not created just by investing in Mutual Funds. For this, you need to be a good fund researcher, and you need to be able to plan the investments made, that is, you need to be able to review them. The above methods we have given will prove beneficial in creating eternal wealth.

FAQ:

1.Why invest in Mutual Funds?

Ans:Mutual Funds provide such convenience to investors that there are many options available for investment. Along with this, the facility of the fund manager is available for managing funds.

2.What is SIP?

Ans:SIP i.e. Systematic Investment Plan is a process through which we can invest in Mutual Funds. Through SIP, one can start investing with little money.

3.How do Mutual Funds earn money?

Ans:Mutual Funds manage the investments of many people. Additionally, some charges are levied on the buying and selling of fund units. These are the main sources of the Mutual Fund company.

4.What is the lock-in period of Mutual Funds?

Ans:The lock-in period is different for each fund. The maturity period for the ELSS fund is 3 years, for tax saving FD it is 5 years and for Provident fund it is 15 years.

5.Which website is best for analysing Mutual Funds?

Ans:The Finshak App is considered best for proper guidance on Mutual Funds.