Diwali decluttering is a cherished tradition, symbolising a fresh start and inviting prosperity into the home. As part of this custom, families clean and organise each space, sorting items to keep, donate, or discard. Removing clutter not only brightens the home for festivities but also welcomes positive energy and good fortune.
Similarly, your mutual fund portfolio requires to be decluttered and there is no better time than Diwali to do it.
Look At Returns
“Look at the overall returns and the annualised returns on each of the funds in the portfolio. Review the returns with the benchmark indices of those particular funds. For example, let’s say Fund A is aiming to beat the Nifty 50 benchmark. Then check the degree by which Fund A is beating the benchmark over a short-term and a long term period,” says Saksham Malik, Founder, Rabbit Invest, an AI-led mutual fund advisor.
Check For Concentration Risk
The next check is to see if the funds you have are having a concentration risk. In other words, for example, if the funds are investing in the same stock, then you might want to keep only the ones giving you a higher return.
“Suppose a fund is investing into the same kind of company, you may want to remove such duplicate funds,” says Soumya Sarkar, Co-Founder, Wealth Redefine, AMFI registered MFD). So, if you have three funds investing between 9-10 per cent in the same stock, you may want to have a relook at those funds and reduce the number.
“Also, suppose somebody is having four or five kinds of flexi cap funds or four or five types of mid cap or small cap funds, then automatically he may choose or two types of each fund,” says Sarkar.
Look At The Fund Manager And Their Past Performance
Another important thing is to look at the fund manager and their past performance. In multiple cases, the fund manager changes and brings fresh ideas to fit into the same strategy, and that could turn around the funds that are underperforming.
“When looking to declutter, after looked at all these parameters, you can keep the funds that have consistently beaten the index and have lower concentration risk with the others in the portfolio. In case you find funds with high concentration risk and good returns, you can always consolidate the portfolio and increase the investment in just one of those funds,” says Malik.
