Five lessons for investors from the Modi govt’s cabinet reshuffle

0
Loading...

The Narendra Modi government rejigged its Cabinet, inducting new ministers and asking some old ones to go. It also formed a new Ministry of Cooperation. Head of key ministries–home, finance, external affairs and defence–were retained.

Just like the central government assessed and made changes to its ministers, investors need to relook and rebalance their portfolios.

EVALUATE PORTFOLIO PERFORMANCE REGULARLY

Loading...

Regularly evaluating your portfolio is the key to achieving financial goals. If you have a mutual fund scheme in your portfolio that you believe has not been performing well, evaluate it and exit. But before you withdraw, assess it on a few parameters.

First, check whether it has better returns than its benchmark. Then, compare the scheme to its peers and evaluate its performance. Finally, give it four quarters before finalising your decision. See if the underperformance is temporary and whether the fund manager isn able to make the course correction. If things don’t look up for four quarters, exit the scheme keeping taxation and exit load in mind.

You should also focus on maintaining the asset allocation. Suppose an investor has a portfolio of 70% equity and 30% debt. If equities run up significantly, his asset allocation can go for a toss. Therefore, you must review your portfolio regularly and restore the balance.

Loading...

VENTURE INTO NEW PRODUCTS OVER TIME

The National Democratic Alliance (NDA) went for cabinet expansion after completing half of its second term. It also added the Ministry of Cooperation after being in power for over seven years.

As investors, you must also start with the traditional, tried and tested, plain vanilla products like diversified equity mutual funds, bank fixed deposits, liquid funds, provident funds, and so on. After you mature as an investor and get comfortable with different asset classes, only then you must add other products after thoroughly knowing their risks and benefits. For example, investors should look at thematic funds, sectoral funds, or strategy-based funds only after they have some experience of investing in equities.

Loading...

GOALS AND OBJECTIVES ARE MOST IMPORTANT

During the cabinet expansion, not all ministers were asked to leave because of underperformance. Some were replaced to achieve particular objectives.

Similarly, if you are close to achieving your goal, start exiting your equity investment slowly. Don’t delay it because equities are performing well. The greed could prove costly. Keep your goal and objective of investment over and above returns.

Loading...

CHOOSE PRODUCTS BASED ON GOALS

Each new minister that the NDA government has inducted is for a purpose. Every minister is chosen with a specific objective in mind. Similarly, investors should be particular about the products they want to use for their goals.

For example, don’t start investing in technology mutual funds because they have better returns than diversified equity fund categories. Have a clear objective of choosing each product.

Loading...

CORE OF THE PORTFOLIO MATTERS

Ministers heading the important portfolios were not touched during the cabinet reshuffle. Similarly, investors need to have a strong core portfolio that would help them over the long term. The few funds in the core portfolio should be stable, diversified and with a strong track record.

For example, if you have made an index fund as part of the core portfolio, you may not need to change it unless the scheme continues to have a high tracking error.

Loading...

(Do you have personal finance queries? Send them to [email protected] and get them answered by industry experts)

Subscribe to Mint Newsletters

Loading...

* Enter a valid email

* Thank you for subscribing to our newsletter.

Loading...

Never miss a story! Stay connected and informed with Mint.
Download
our App Now!!

Stay connected with us on social media platform for instant update click here to join our  Twitter, & Facebook

We are now on Telegram. Click here to join our channel (@TechiUpdate) and stay updated with the latest Technology headlines.

Loading...

For all the latest Business News Click Here 

 For the latest news and updates, follow us on Google News

Read original article here

Loading...
Denial of responsibility! TechAzi is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More