Congratulations, you have started investing! Now, that you have done the difficult part of overcoming inertia and start investing, the New Year is a good time for a review of your investments. You might have chosen one of the three modes to invest. Invest directly in stocks, active equity mutual funds or, passive index funds. Any, or a combo of these is fine, as long as one sticks to them on a regular basis. That’s how real life investing is, boring. It is not supposed to replace your other ways of getting high, like participating in adventure sports. However boring, investments need nurturing. Regular care and tending to, help a plant grow into a lush tree; likewise it is with investments. They do not come under the “Fill it, Shut it and Forget it” category.
Now, why would anyone spend time poring over money matters when one can have memorable times doing something else. Firstly, because it is your money. No one else will ever have as much interest in its wellbeing as you would – ever! Review is like a check-up of your financial health. This need not be done daily; but, at the minimum an annual review is essential. The whys and wherefores follow…
Any investment needs an objective or, goal that acts like a beacon. Most goals that involve equity are long term goals. Just like milestones we see on a highway, periodic confirmation that the investment is going on the right track is essential to avoid shocks. While most goals don’t change, sometimes they do. Like for example your child may change the education plan. This may require additional funding or, may release some of the money that was originally intended for a more expensive education. You may add to the list of goals, like an international holiday that requires rejig of present investment levels.
Consciously or, otherwise we accumulate mutual funds that might be investing in the same set of stocks or, focused on same sectors. This creates duplication and adds risk to your portfolio as a sector crash can impact all your funds at the same time, defeating purpose of diversification through multiple mutual funds.
As with any sector, the mutual funds too face manpower turnover or, consolidation. Changes in either the fund manager or, ownership of the fund house can greatly impact your portfolio. While such changes are not a signal for one to immediately sell entire holdings, they are definitely a red flag that requires close monitoring for some time to confirm that the original purpose of your investing in that particular scheme continues to be met. Else, it is time to switch to another fund house/fund that matches your goals.
Have a thorough review of where your money stands in meeting your needs and dreams, it is in your best interest. My best wishes for happier investing in 2019!
The author writes commentaries on contemporary financial, business, taxation and political issues.