Mutual Fund Portfolio: Why you must review it yearly


A mutual fund portfolio if planned, constructed and managed well can change one’s life for the good.

If not, then there is no easier recipe for self - destruction of one’s own hard earned money.

Planning, organizing and managing a mutual fund portfolio is only half the job done, making sure your portfolio is on the right track and still aligned with your goals is what eventually counts.

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What is a mutual fund portfolio?   

A mutual fund portfolio consists of all the various mutual fund schemes that you have invested in.

This includes mutual fund schemes of all asset classes, be it equity, debt or liquid.

It includes mutual fund investments made via different modes be it, SIP or Lumpum or SWP.

To put it in short, a mutual fund portfolio means the collection of various mutual fund holdings.


     Along with having a good mutual fund portfolio and being patient and disciplined with it, what is also important is being able to review it on a yearly basis, both in terms of the knowledge to do so and the ability to do so.

If not then investing in mutual funds is a waste of time, energy and your hard earned money.

Reviewing your mutual fund portfolio on a yearly basis is necessitated since we are living in an ever changing world and mutual fund investing is no different.


Re Categorization of Schemes

In 2018 SEBI brought about re categorization of mutual fund schemes.

A mutual fund house could have only one scheme in a particular category.

This meant in cases where more than one fund was present in a particular category, the two were either merged with each other, another fund or was re categorized.

This re categorization exercise also gave rise to new categories like Large & Mid and Balanced Advantage.

In such a scenario you need to take necessary actions if any of your current schemes are affected.


Additional reading: Click Here to read about mutual fund mistakes you should avoid making 

Changes to a Fund house

In 2021, Sundaram mutual fund had bought over Principal mutual fund.

In 2018 Blackrock had exited DSP Mutual Fund.

Edelweiss mutual fund had taken over the business of J.P Morgan when the latter decided to exit the Indian mutual fund scene.

In such a situation you need to be abreast with the effect such actions will likely have if you hold any schemes of mutual fund houses that are either being sold to another fund house or sold to your fund house.

The possibilities include from merger of the scheme to another scheme of same category or another or being re categorized as a whole new fund and category.

In such a scenario you need to consolidate your portfolio keeping in mind the likely changes it would have on your mutual fund portfolio from new fund, category, exit load, taxation, etc.


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Merger of Schemes 

Prior to SEBI’s recategorization exercise in 2018, most fund houses would have close ended funds.

Close ended funds were closed for usually around 3 years, meaning during those 3 years you could not invest in that fund or redeem from that fund in case you had invested earlier.

Most close ended schemes once they mature are usually merged with another scheme.

Another reason for merger is under performance or not being able to garner enough aum in a fund, in such a case the scheme is merged with another scheme.


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Exit load  

It is a very common misconception that all mutual fund schemes have the same exit load structure and period.

Another common misconception regarding exit load is that it is permanent.

Neither of the two is true.

All mutual fund schemes can have different exit load structures and period and they can also change it from time to time.

There are talks of SEBI bringing about uniformity in this regard which would be ideal.

Being updated with your exit load is important and necessary if you are planning to redeem anytime soon.


Mutual funds & Tax

If you do fall under the tax bracket and therefore need to claim exemptions under section 80c of the Income Tax Act, reviewing your mutual fund portfolio on a yearly basis will help you know whether you have invested in elss funds yet or not.

If there any redemptions made in a financial year that attract tax then the same has to be reported and paid for while filing your income tax.

At times it is also possible to avoid LTCG for equity mutual funds when the profit crosses more than 1 lakh held for more than a year, if they are redeemed in two financial years instead of one since the profit redeemed gets split into two financial years instead of one.

Additional reading: Click Here to read more about how mutual funds are taxed 

Modes of Investment

There are various modes of investing in mutual funds like:

  1. SIP
  2. Lumpsum
  3. STP &
  4. SWP in case of withdrawals.

If you are investing via SIP’s but have not registered for perpetuity then you need to keep a track of when it ends in case you wish to renew.

In case of SWP, you need to keep a track of amount still deposited and amount withdrawn so as to keep a check on the taxes applicable.

For lumpsum investments, certain mutual fund schemes do not allow lumpsum investments in them either temporarily or till further change is announced.

The same is true for SIP investments as well where they may limit the maximum amount per pan.

All these changes drastically affect your plans and therefore your mutual fund portfolio.

Changes to your scheme

Mirae Asset Emerging Bluechip has capped sip registrations per Pan at Rs 2,500 and does not allow lumpsum investments in the fund.

Similar is the case with SBI small cap fund.

Both L&T Mid Cap and L&T Emerging Businesses (Small Cap) have seen their performances dip after the exit of their previous fund manager.

ICICI Multi Cap continued to function as a multi cap despite most multi caps choosing to re categorize as flexi caps when the new rules came into effect in the early part of 2021.

This meant that the fund now has to mandatorily invest 25% each into mid and small cap stocks at all times rendering past returns and strategies of no use.

Similar was the case with Mirae Asset Multi Cap which was converted to a Large cap fund, on the conversion of which it had to compulsorily invest 80% of its aum at all times into large cap stocks which again rendered past returns and strategies useless.

All such changes not only affect your schemes directly but also your overall portfolio, not wanting to take the right course of action to counter the changes is one thing but not being able to is another.

Lack of ability should not be a reason to leave your mutual fund portfolio helpless.


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Close to Goal

Investing in equity mutual fund is a given if you want to achieve your long term goals.

Since equity investing can be volatile, it is important that you are aware how close you are to accomplishing your goals, both in terms of money and time.

The closer you get, the better it is to shift the funds to a less volatile fund gradually.

This is because you do not want to be in a position where you need your money but the market has all of a sudden turned volatile thereby bring down your valuation.

Certain goals you can delay like purchasing a house but certain goals cannot be delayed like your child's higher education.

If indeed the market turns volatile when you need your money, you will be forced to redeem at a loss which will undo all the hard work, patience, discipline and planning of years.

This can be simply avoided if you review your mutual portfolio on a yearly basis and keep a check on both, the goals aligned as well the time period.


Are you investing in the right mutual funds?

Change of Goals

During the course of your investment journey, certain goals will be achieved before the others.

In some cases, you might be able to fulfil your goals via sources other than your mutual fund portfolio.

This can be possible if you come in for unexpected money in the form of bonus, inheritance, etc.

In all such scenarios your mutual fund portfolio will need a rejig and consolidation.


     Having a mutual fund portfolio and a strong mutual fund portfolio are two different things.

   You need someone who has both the time and the professional technicalities to track your portfolio on a yearly basis and guide you from time to time with regards to any development for your mutual fund portfolio and let you know if any action needs to be taken from your side.

     If not then it is better to stick to traditional means of savings like fixed deposits in which case even if you may not gain much but at least you would be aware with what is going on.

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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
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