You must review your portfolio at least once every year

3 Apr 2022

When looking to achieve something, we generally set a goal and then work on the steps needed to reach that goal.

As kids, you drew up timetables to study, and as adults, you probably have a timeline of when you want to achieve a target. While working on these goals, we also periodically check the progress made on these goals.

Financial planning is similar.

A new financial year has just started, and what better time than now to plan your finances for the year? Planning right away saves you from this headache at the end of the year and distributes your investments throughout the year.

Once we outline our financial goals, we need to break these into the kind of investments that each goal will need, based on the duration and risk appetite.

While selecting the appropriate investment for each goal is the first step, it is also essential that we monitor these investments at regular intervals to see how they are performing.

Let us assume you want to invest to buy a house ten years from now. You have assumed a return of about 12% from your investment and are expecting inflation in real estate to go up by 5% each year and have started investing accordingly.

Your investments have yielded less than 10% returns each year for the next two years, while real estate inflation is in line with your estimates.

In a situation like this, a periodic review will ensure that you are increasing your investment amount or making modifications to switch your investments to an asset class that could yield better returns.

If neither of these is possible, you could also consider delaying the purchase of your house.

The situation over the next eight years could improve or worsen further, and you must regularly keep reviewing your portfolio so that you are not caught unawares when you actually need the funds and fall short.

Similarly, a favourable movement of both inflation and the returns on your portfolio could also help you meet your goals faster. Alternatively, you could consider moving the surplus returns generated to a fixed income instrument for capital protection.

It is, thus, important to keep reviewing your investments regularly to ensure that you are on track for your financial goals. Click here to review your investments!

On that note, let’s plan a new goal today!

 

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The details on returns and market scenarios mentioned are hypothetical examples to understand the concept and to be used for illustrative purposes only.

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© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
© Kotak Mutual Fund.2022
Mutual fund investments are subject to market risks, read all scheme related documents carefully.