Follow the money: how to keep track of your investments to achieve your goals

“What gets measured, gets managed.”– Peter Drucker

Most of us spend a lot of time understanding the right mutual funds to invest in, creating goal-based investment plans and automating our SIPs to ensure timely investments. However, the one aspect, which tends to take a backseat, is keeping track of our mutual fund portfolio.

A friend of mine who was looking to redeem her investments shared her mutual fund portfolio with me. Over the last ten years, she had invested in 20 mutual funds, heavily skewed towards large-cap and multi-cap funds.

When asked how she chose all those funds, the response included suggestions by various financial advisors at different points of time, advice from family, friends and colleagues, mixed with her own choices. How frequently did she check her portfolio? She had no clear structure, which had led to the portfolio being high on quantity and less on quality.

The situation is similar to a case where someone who is on a road trip, with a certain destination in mind — but no clue whether it is the right route, and with no means to assess the distance covered.

Why is tracking our mutual fund portfolio essential?

Firstly, tracking your investments is important to ensure that you hit your goals. Additionally, there are external events and changes in the market that could have an impact on our portfolio. Timely and periodic checks that ensure your investments are still on track is essential.

How frequently should we review our mutual fund portfolio?

Long-term equity funds don’t need to be tracked daily or weekly; we advise you to review your mutual fund portfolio once every six months or a year.

A few exceptions include changes in our financial goals or taking a check before making any unplanned investments.

What does tracking investments include?

1. Ensure the balance between equity and debt funds is maintained as per your goals

With changing market performance, your portfolio might skew towards debt or equity disproportionately. In such a case, the portfolio would need readjustment — you might need to withdraw funds from one place and more it to another investment to maintain the balance needed.

E.g. If per your goal and risk appetite, a 60 per cent equity and 40 per cent debt portfolio is recommended. After a year, due to above-average returns from equity, the portfolio might have 65 per cent equity and 35 per cent debt funds — this would mean either selling part of the equity funds to realign the portfolio or adding more debt funds to the portfolio to ensure the overall balance is maintained. (illustrated below)

2. Watch out for over and under diversification

Given so many types of mutual funds, having more than 30 per cent in a single fund or a single category could lead to under diversification. Based on your goals, we recommend that your mutual fund portfolio has a healthy mix of large-cap funds, mid and small-cap funds and sectoral funds.

Quantity of funds is not the only criterion. As an investor, you need to ensure that your portfolio is yielding steady returns.

3. Weed out the low performers

Compare returns of the funds to their benchmarks as well as peers in their category. If the fund has been recently invested in, watch it closely, but give it time. However, if the fund is clearly an underperformer for 2 or more years, we think that money should move to a more favourable option, based on financial planners’ advice.

These steps can easily be tracked using platforms like the Basis app, which provide you with a dashboard as well as analysis for your portfolio. Don’t fall behind your goals — just a bit of discipline in reviewing the portfolio can give you a good night’s sleep without having to worry about your money.

To learn more about money management, discuss all things money with a community of financially independent women and get personalised guided investing, sign-up for Basis now. India’s only personal finance platform focussed on women.