1. Tenure:
For Example, While going through Krishna's portfolio, I realized his first investment was in the ELSS fund. He had done SIP in an ELSS fund from the last 12 months. ELSS funds have a lock-in period of 3 years. So if he plans to move his present funds to any other ELSS fund, he has to wait for the next 3 years. If he keeps switching between ELSS funds every year, his portfolio will be full with a bunch of ELSS funds.
2. Index Funds:
Index funds are a very crucial part of a long term investment portfolio. Krishna portfolio had a missing component of index investing. So, I explained to him Index Investing and how to make the best use of Index funds in investment. I personally prefer investing through Index ETF. Index Funds Returns, in the last 20 Years - NASDAQ 100 is up +468%, DOW JONES is up +191%, GERMAN DAX is up +163%, S&P500 is up +158% and most surprising is India Sensex return. It is up a whopping +928%.
3. Direct Mutual Funds:
Krishna's portfolio had all regular funds. TER of direct mutual funds is lower than regular mutual funds. TER (Total Expense Ratio) has a direct bearing on your returns massively through the power of compounding. For example, Rs 1 lakh over 10 years at a rate of 15 percent will grow to Rs 4.05 lakh. But if we consider an additional expense ratio of 1.5 percent, your actual total returns would be Rs 3.55 lakh, nearly 14 percent less compared to direct funds. So, the selection of direct mutual funds over regular mutual funds is very important.
4. TER (Total Expense Ratio):
4. TER (Total Expense Ratio):
We have already discussed TER in the above point. But, even in the direct fund, TER keeps on fluctuating and communicated to investors through Change in Base TER (Total Expense Ratio) notice/mail from funds. This change must be keenly checked, to align your investment projections and monitor your return impact.
5. Change in Mutual Fund scheme name and changes of fundamental attributes:
Change in Mutual Fund scheme name and changes of fundamental attributes can have an adverse impact on your investment projection and returns. This might change your overall reason for holding a particular fund.
6. Goal
6. Goal
Last but not least, GOAL. In investing, the goal is your idea of the future projected return combined with investment strategy and timelines. Before mutual fund portfolio review, check whether your goals are changes. In the case of Krishna, he had a change in goal duration and amount.
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