VR Logo

How should I compare the performance of funds in my portfolio?

This is the time to follow the basic principles and not to make any inferences, says Dhirendra Kumar

When the market is falling, how should I evaluate the performance of funds in my portfolio? Should I compare their returns only in the last two weeks with those of peers or should I compare long-term returns like five or seven years?
- Manu Singh

Given the present situation, don't compare because the comparison or your inferences will change every day. If at any point, you look at which fund went up, you'll see times when even value funds, which have been out of favour for a while, going up rather than growth funds. So, all of these may lead to confusion.

I think this is the time to really follow your belief and the basic principles. Most importantly, check whether you are holding a diversified portfolio on an aggregate basis. If you have a small-cap fund and a mid-cap with a substantial portion in a large-cap fund, then it's a diversified portfolio.

There will be different kinds of funds which will gain or lose by a wide margin and every day it could be dramatically different. So, in times like this, it's very confusing and I don't think there's any value in deriving any inferences here or concluding anything. I would say that make sure that you have a diversified portfolio and you are onto your SIP. And even if you have to invest in a lump sum, devise a methodical way of investing, say, investing the lump-sum amount within the next six months on a weekly basis or three months on a weekly basis.

Another important principle is to make sure that you are able to realise the amount of money from all your investments, even at losses, so that you don't have to worry about any supplementary income on which you can depend from your investments. If you don't have these basic foundations in place, then you will not be able to stick to your plan. So, devise a plan which is not very erratic and stick to it.

Post Your Query