Usually you invest for your long-term financial goals, then forget
and never look at those investments. This mistake can prove costly
particularly in case of equity investments. You expect certain mutual
fund scheme or equity shares to grow after certain years, which may or
may not happen. What happens generally is that either it would have out
performed or would have under performed. The time when you would have
planned and invested, your financial situation would be different than
what it is today. So, either your goal would have altered or your
priority towards the goal would have changed. What have you done to know
whether your investments and goals are not derailed? Have you ever seen
and reviewed your investment portfolio and financial goals?
If not, then it is important to do it now and after that a periodic intervals.
Why should you review your financial plan and investments?
Performance of investment:
Certain funds in which you have invested would have performed well in
the past, but it is not necessary that they perform well in the future
too. You should check the performance of the assets with its peers and
the benchmark index. The fund manager of the mutual fund scheme you
might have invested would have changed or may be the fund house itself
would have merged with some other AMC. These kind of changes can affect
your investment. Therefore, it is very important to track the
performance of your funds/ investments.
Asset Allocation:
It is very important to analyze your investment portfolio
periodically. The asset allocation ratio changes on a day-to-day basis,
depending on the performance and proportion of the assets in the
portfolio. Certain assets out perform as compared to the expected
returns while certain assets under perform. In this case you should
rebalance the portfolio as per the proportion. You also need to change
the asset allocation when your goal is closer. Suppose if you are only
2-3 years away from your retirement, you need to shift your portfolio
from equity to debt systematically.
Reprioritize and/or alteration of goal:
Sometimes your financial situation may take a diversion, which may be
positive or may be negative too. You may have to alter and/or
reprioritize your certain goals depending upon the situation. For
example, if you and your spouse both are working and the regular
investments are earmarked considering the income of both; and if spouse
quits working to take care of the child, then you may have to
reprioritize and alter your goal accordingly. Say you were planning to
buy a house after 3 years, but suddenly you received lump sum amount
through inheritance, in this case you can pre-pone your decision of
buying your new house, assuming investments for other goals suffice.
Insurance Need:
You should not only review your investments, but also your insurance
needs. Your life insurance need may change after a certain period
depending upon your assets and liabilities. For example, if you take a
personal loan, your life insurance needs increase to the extent of the
amount of loan taken. You need to buy additional life insurance if any
additional liability is added to your account. You also need to review
the performance of your insurance policy if you have bought a unit
linked insurance plan.
Interest Rates:
The interest rates change periodically and the best part is that you
don’t even come to know. Moreover you also don’t know the interest rate
at which your loan is outstanding whether it is at par with the current
lending rates in the market. Many a times we come to know that you are
paying much higher interest on your loans as compared to the prevailing
lending rates. Hence it is high time that you shift your loan to a
cheaper rate.
Maturities of Fixed term securities:
Sometimes, you fail to keep track that your fixed term securities
like fixed deposits, NSC’s and bonds, etc. if they have already matured
and are decaying by lying idle in your files and folders. So, if you
review your portfolio, you at least know that when they are due for
maturity and how you can utilize the maturity proceeds or renew it
further as per your situation and requirement.
When do you need to review?
You need to review your investment portfolio at least twice a year.
It is just a matter of few hours to review your portfolio. You should
fix a date which may be your birthday or anniversary or your child’s
birthday or any other memorable day of your life. . Whenever you review
your portfolio; you should make sure that you review it thoroughly.
When ever you will review your portfolio for the first time, either
it will surprise you or shock you. It will surprise you if it your
portfolio has grown extremely well, beyond your expectations and has
multiplied. But, it might happen that, you may get a shock looking at
your portfolio if your portfolio has given poor returns. So, in order to
avoid shocks you need to review your portfolio periodically. Thus,
reviewing your portfolio helps you to get a clear view of your portfolio
and goals.
In case you still find it cumbersome, you can take professional services of a Certified Financial Planner to do the job.
Published in: Moneycontrol.com, The Tribune
