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4 Ways to Make Your Portfolio Work in Troubled Times

Highlights

  • What to do when mutual fund investments continue to be bearish? The answer is to review the portfolio.
  • Monitor the performance regularly, go for capital protection, portfolio realignment in troubled times.

Having a well-designed portfolio isn’t enough. Investing job doesn’t end here. You need to understand market dynamics and review your portfolio regularly. Be it a bull phase or a bear phase, a portfolio review is a must. As the saying goes, better late than never, regular reviewing will help in making investment decisions before it’s too late.

Here are 4 Ways to Make your Portfolio Work in Troubled Times:

Without waiting any further, let’s check out the things you need to do when the investments go through a subdued run.

Monitor Regularly

How many of us are actually doing that? Monitoring doesn’t mean you check your portfolio every day. Checking every day will just make you an unstable investor because reacting to daily market movements will result in huge losses. Therefore, have a plan, be it quarterly, half-yearly or yearly, make sure you review your portfolio and make the necessary alternations to it. While deciding to stay invested or to withdraw, make sure you consider other factors like risk, business cycle, future growth potential, in addition to returns. Even in troubled times, making decisions without completely reviewing your portfolio and analyzing the market conditions is the biggest mistake that you can make.

Capital Protection

In a volatile market scenario, every investor’s prime consideration is to protect their capital. Be it shares, mutual funds, real estate or any other asset class preserving capital is of utmost importance. With increasing defaults in fixed income instruments, the markets have been very unstable. All that investors can do is try to have a plan to safeguard their capital at least. Analyze the markets, see if there is a growth potential even during troubled times for your investments. In the case where there is an adverse impact on your holdings, it’s better to get rid of them before it eats up the returns and the capital invested.

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Sell to Make Profits

Selling the assets is as important as buying them. It’s important to book profits at the right time or stopping the losses. More than timing the buying, it’s important to know when to exit. Even before investing, have a target to earn a certain percentage of return or have a stop-loss limit.

Fearing the downturn and stopping your SIPs isn’t correct. SIPs actually help you average out the cost of investing. When the NAV of a fund is low, more units are earned for the same SIP as opposed to when the market is high. Therefore, SIPs done through different market cycles will help you in earning high returns than in any other. Also, if the market is completely against the fund that you have invested in, there is no point in having your investments in it. Understand whether the fund’s investment objective is still aligned to your investment objectives. Don’t be greedy to earn more returns, have a set target for your return expectations and sell them once you achieve them.

Realign the Portfolio

Investing is a continuous process. Investing, reviewing and rebalancing. After investing you cannot leave them unattended. Investors need to continuously review their portfolios and make necessary adjustments. Again, reviewing doesn’t end the process, you need to realign the portfolio in a way that it suits your current investment objectives. Identifying funds and investing in the right one is a big task. Not everyone has the time to do this. Here’s when Financial Advisors come into play. Hiring an advisor will help you in assessing the current funds and rebalancing your portfolio with better funds to achieve your goals faster.

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The writer of this post is Amar Rasali, he is a team leader in Mutual Funds division at Wishfin

Disclaimer – “Mutual Fund investments are subject to market risks. Please read the scheme document carefully before investing.”