Nov 21, 2012 12:51 PM IST | Source:

Importance of managing and rebalancing your MF Portfolio

Along with investing it is equally important to keep a tap on your mutual funds investment in order for money to grow at a healthy rate. Financial expert Sanjay Matai advices investors to not only choose those funds which suit their need but also nurture them intelligently to accomplish ones financial dreams.

In Oct 2010 the markets were at the peak and Nifty was at 6233. I had three options - (i) book profits, (ii) hold on or (iii) de-risk the portfolio.

I decided to neither be too cautious (i.e. book profits) or too aggressive (i.e. hold on). I took the middle path i.e. de-risk the portfolio by switching from High PE funds to Low PE funds (of course, other parameters such as past performance, fund manager, portfolio characteristics, fund house, risk parameters, etc. meeting the desired levels).

As may be observed in the below table, even though the Nifty fell by almost 9%, I was better off in all the funds with respect to the overall market performance i.e. the Nifty. Even with switches to low PE funds, I was much better off than had I remained in the erstwhile high PE funds.

Of course, had I booked profits and invested the proceeds in bank FDs, I would have made positive returns of at least 6-7% post-tax. But it is very easy to be wise in the hindsight. If we have to make money in equity, we have to remain invested - we can never predict how the future will unfold.

Alternatively, if the markets had gone up, maybe the earlier funds would have performed better. But that again is 'if'. Rather than living in the UNCERTAIN world of "ifs" and "predictions", it makes more sense to follow the time-tested principles of investing. That will make you money - more surely and with less day-to-day anxieties.

Tabled below is the experience after 2 years in Oct 2012. On absolute basis, the Nifty was down 8.95% at 5676.

Switch fromSwitch toGain/Loss in previous fundsGain/Loss in the later fundsGain/Loss due to SwitchGain/Loss with respect to Nifty
DSP BlackRock Opportunities FundBirla Dividend Yield Plus





HDFC Equity FundBirla Dividend Yield Plus





Reliance GrowthICICI Pru Discovery





ICICI Pru Top 200ICICI Pru Discovery





HDFC EquityTata Equity P/E





Franklin India BluechipTata Equity P/E














(Figs are on absolute basis; not annualized)

Firstly, choosing best funds DOES NOT mean choosing the "top" performers but rather the "consistent" performers. Top performance changes often, but consistency is more stable.

Secondly - and note the 'subtle' difference - you should NOT focus on funds that will give 'maximum' returns but those that will 'help you meet your financial goals and desires'. Remember you are not in a contest where the winners will be rewarded. Rather, you are in competition with yourself to meet as many personal goals as possible. Your motivation should be to achieve 'your' milestones; not to make more returns than your neighbour or colleague.

Thirdly, as we have seen earlier, remaining invested doesn't mean to invest and forget. We have to monitor the portfolio. But beware - this monitoring SHOULD NOT be done on a day-to-day basis. Reviewing and restructuring once every 3 months will be more than sufficient (unless there is some exceptional event in the interim).

Restructuring involves

a) Shifting from under-performers to better funds
b) Rebalancing the fund-wise exposure
c) Rebalancing the category-wise exposure
d) De-risking the portfolio by switching from High PE funds to Low PE funds
e) De-risking by switching from mid/small-cap and thematic funds to large-cap funds

Bottom-line: Choose funds that are best suited to realize YOUR financial dreams and intelligently NURTURE your portfolio.

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