Chapter-10: MF Basic Instructions
This is most important chapter which deals with the critical review of various portfolios, tentative beginners portfolios and a summary of takes
10.1 Mutual Fund Portfolio Review
10.1.1 Time Frame
Once the investment has been done, stick with it and made a review properly from time to time. Once purchased equity fund, try to give it 4-6 years because the market gets a bounce back in the period of 3-4 years.
10.1.2 Return Earned
The peer review, benchmarks, and return on investment are the prime parameters to make the review.
10.1.3 Material Change in Funds Objective
If material change in the fund objective, then one might change the fund.
For example,
Initially, the fund’s objective was to change just from mid-large cap to large cap, one may switch to change the fund.
10.1.4 Change of Fund Management/ Manager
It is advisable to wait for 9 months to 1 year and review the performance with stated parameters like peer review and deviation with benchmark. Based on the results try to interpret the switching condition.
10.2 Mutual Fund Knowledge Resources
https://www.valueresearchonline.com/
10.3 Beginners Portfolio Sample
v 2 Balance Fund/ Index Fund
v 2 Diversified Fund
v 2 Mid and Small Cap Fund
v ELSS
v 2 Short-Term Debt Fund
v 2 Liquid Funds
Where equity investment (1 index/balance fund, 2 diversified funds, 2 mid and small cap funds) while debt fund investment (2 short-term debt funds) for mid-term investment, and 2 liquid funds if short-term investment is required. 1 ELSS is required if an investment needs to make for tax benefits.
10.4 Steps To Be Adopted While Choosing the Diversified Fund
-beat the benchmark
- Peer comparison
- Expense ratio
- Fund Objective
- Fund Manager and about his/her details
v Always invest in diversified funds rather than sectorial funds.
v For 1 to 2% higher return, we should not choose the fund, but choose the funds having consistent performance in the long term else move to stock investment if you really want more.
v Invest in short-term funds, liquid funds, or long-term funds only because other fancy things are involving more risks compare these with more understanding of complexities.
v Strict yourself up to 4-star, and 5-star rated funds as this filter will reduce the number of funds to be analyzed.
v It is good practice to invest in a direct plan to reduce the commission charge.
v Invest gradually not a lumpsum and this can be treated as the most precious rule.
10.6 Simple Formulas of Investment
v Spend less than what you earn, at least 40% of your income let it invest. Don’t try to show off the thing as you are just making yourself more poor by doing so.
v Invest in the stock market with suitable mentorship which means don’t just invest and be bankrupt or lose the money and then learn, learn the same prior to the investment.
v Delayed gratification because such investments take enough time and finally it is compounding of money that serves your purpose in better ways with time.
v Keep learning is always beneficial for what you are doing.
v Follow ABS (Avoid being stupid), first think about how you can be bankrupt, and then avoid those routes to follow.
v There are always chances to make money if you are trying to invest for the long term. If one missed 2003, 2009, 2013, 2016, 2020, there will be upcoming years so be ready for the same.
Thank You For Your Patience
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