Tips What To Review In Your Mutual Fund Portfolio

Monday, July 26, 2010, AM | Leave Comment

Whatever investment in mutual funds you have made, you should review your portfolio every so often. That way you know the funds are on track getting you a good return. Financial experts typically urge investors to review their mutual fund portfolio annually.

The problem is many investors don’t know what to look for and what kind of questions to ask the fund manager.

Tips What To Review In Your Mutual Fund Portfolio

Here is a checklist for reviewing funds. Make sure the choices you made when you bought the funds still make sense. Consider, if you will, the following points when you review your funds portfolio:

  • Risk profile

    Evaluate how much a fund lost during the recent bear market. Call your fund manager or check with Morningstar Mutual Funds to find out how a fund has fared during this period. If the information leaves you feeling overexposed to potential losses, sell at least some of your shares.

  • Performance

    Your fund performance should not drastically lag behind that of its category as a whole. Even great fund managers have periods when their funds lag the Dow Jones Industrial Average (DJIA) or the S&P 500 Index. However, if the fund manager has a solid long-term record, then keep it.

  • Fund manager

    When you bought funds, you were hiring managers for their record. Find out if they are still running the show. If there are different managers now, ask about their records. If the new managers were trained by their predecessors, consider retaining your shares for at least a trial period.

  • Eliminate duplication

    If you go out and buy several top-performing funds at the same time, you will likely end up with several funds that own the same types of securities.

    When those types of securities lose ground, your portfolio will suffer a serious blow. What you can do, in that case, is to compare the funds’ top-ten holdings lists.

    If there are more than 3 or 4 duplicate holdings, keep only the fund with the best five-year performance record.

In a Nutshell
By reviewing your funds portfolio every year and examining the points mentioned, you would be on top of your mutual funds investment.

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