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● Reviewing Your Financial Portfolio

What do you do with your car for a smooth long-term run? An oil change every 3,000 miles definitely helps. The same logic applies to your portfolio. You should review your portfolio frequently and rebalance it if necessary for your investments to fructify. Often, you may adopt an investment approach that suits you at one point of time. For example, you may have a high exposure to equity at an early age, say in your late 20s, so as to meet your goals. At that age you have the risk appetite to deal with ups and downs of the skewed portfolio. But the same strategy wouldn’t apply when you touch 40. Your needs change and your responsibilities are greater. You don’t want to kick yourself at the age of 50 just because your portfolio has not delivered what you intended due to some wrong investment decisions.
Just like an annual health check-up, a periodic review of your investments will help it stay in shape.

The decision to review your portfolio is prompted by regular as well as external circumstances. As a regular exercise, you should review your portfolio once in every quarter for investments with less than three-year holding periods. For long-term investments, an annual exercise will suffice.

This could be in the form of a crash in any asset class where you have parked substantial funds, higher salary, windfall gain, change in investment objectives, taking up a new job or getting married, etc. You may have started off with an asset allocation strategy that is not in line with your goals. In such cases, a timely review helps. But avoid making frequent changes in your investment strategy, especially for long-term instruments, as they are tailored to meet your milestones.

At blue ,Reviewing a portfolio doesn’t necessarily mean you have to churn it often or deviate from your long-term goals. You should cross-check your expectations with the real picture. At the beginning of every year, you should have some ballpark figure and work towards it through your investments. You should monitor your investments as part of your portfolio maintenance. But buy and hold — the longer the better. Also, the main objective should be that the overall portfolio should perform. Don’t read too much into the daily movements of individual stocks or mutual funds. Get the pieces of the big picture right.

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