What is the recommended frequency for a portfolio review?
Buy and hold” does not equal “buy and forget”, although many anecdotal stories discuss finding your grandfather’s stock portfolio. You have to review your investment holdings periodically and make informed adjustments.
A portfolio audit is a process of reviewing holdings and making necessary tweaks (if required).
We recommend that investors review portfolios once a quarter. A more frequent intervention may be too frequent to do any real good.
When you say invest for the long term, why do you recommend changes from time to time?
While Long Term is crucial to investing, the quality of the chosen investment matters too; an investment with unfavourable prospects would not add much value to long-term performance.
Not all equity mutual funds are created the same and, more importantly, do not stay the same over time. There is a wide difference in their performance, and while the good ones should be held for long, the ones that don’t stack up need to be quickly replaced.
The key, therefore, is to separate the idea of investing in the category of “equity mutual funds” from a specific “fund” or “scheme”.
What we recommend is that you:
- Invest for the long term in equity mutual funds.
- Monitor your investments, and periodically weed out ones that don’t have desirable characteristics.
- Don’t get attached to any individual fund or scheme.
You stay invested in equity mutual funds for the long term, continuously review, and, if required, periodically intervene depending on the future prospects of individual portfolio components.
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