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Know your investments

Having mutual fund investments and managing them well are two different things

Know your investments

Generally, Value Research publication readers maintain a decent level of knowledge about their investment portfolios. Given the resources we offer, staying informed is almost a given. While they may lack detailed analytics, they possess a solid understanding of the essentials, such as the value of their investments and the performance of individual funds. However, this savviness among our readers is not typical and not reflective of the average mutual fund investor. The latter group tends to accumulate funds rather than invest with a strategy, often through no fault of their own.

The term 'flying blind' refers to operating without a clear direction, which, in aviation, is manageable due to the availability of navigational instruments that pilots use to steer the aircraft even when visibility is zero. Investors don't have access to such instruments. Or perhaps they do, but more on that later.

A big pile
Some months ago, we surveyed the portfolio sizes (in terms of number of funds) of mutual fund investors and were shocked at the results. We discovered that the majority of investors held portfolios with over 10 funds, with 20-30 funds being fairly typical and portfolios exceeding 50 funds being uncommon yet not exceptional. Typically, those with fewer than 10 funds had been investing for just a few years.

Earlier, I had personally interacted with someone who was an extreme example of this phenomenon. In addition to PPF and NPS, he had spread his investments across around 70 mutual funds. Such a scattered investment strategy is, regrettably, common, particularly for those guided by salespeople over the years. Historically, sales commissions were structured to reward initial investments heavily, thereby motivating sales agents to continually direct savers to new funds, ostensibly for the sake of diversification.

While his case may be extreme, it's not uncommon for individuals to have a mishmash of 20-30 different funds. Managing and understanding such a dispersed portfolio is equally challenging unless specific measures are taken.

Awareness
Far too many investors appear to operate through gut feelings and impressions. They should heed the well-known saying, 'What you cannot measure, you cannot manage.' This reliance on gut feeling doesn't translate to investing, particularly for the average person looking to save. In investment, the rule of numbers is absolute: you must measure to manage effectively. Without a clear quantitative grasp of your investment landscape, achieving and tracking progress toward your financial objectives becomes challenging. Even more concerning is the possibility of not recognising whether those goals are within reach or having a well-defined plan to achieve them. To be fair, this can be complex and time-consuming, unless you have the right tools of the kind Value Research Premium offers. It takes a fresh look at your investments, no matter how many funds you have or how you acquired them. Rather than starting with the investments, it begins with your financial goals — both short and long term. These include predictable expenses like buying a house, children's education and retirement. With these goals in mind, we can select investments tailored to each one based on the required amount, timeframe and other factors.

Now you're left with two issues: what to do with the unsuitable funds you already have and how to choose new funds to meet your goals. 'My Investments' at Value Research Online can help with both. Our enhanced features in Value Research Premium make it easy to enter all your past transactions to see the whole picture. From there, we can advise on reallocating funds or selecting new ones aligned with your financial goals.

The key is starting with your goals rather than your haphazard collection of investments. Let's create a plan to get you where you want to go. All you have to do is the following:

  • Request your Consolidated Account Statement from the registrars (we will help you do this).
  • Forward that email to our investment tracking import system.
  • Get the most comprehensive analysis of your investments that are available in India.

There's no simpler way of doing this. It gives you a map of where you are. As for where you need to go, Value Research Premium has a set of invaluable tools, again, by far the best any Indian mutual fund investor would have access to. Here's a brief description of some of what you will get:

Portfolio Planner: These are custom portfolios suggested to you as part of your premium membership. The algorithm that we have evolved takes into account your goals, your income, your saving capacity and several other factors.

Portfolio Analysis: Only a few members are starting their investing from scratch. For most of you, a big question is whether your existing investments fit your goals. This is often a tricky question to answer because there are a lot of implications of switching old investments, not the least of which is taxation. In the Premium system, you can get an evaluation and a suggested fix-list based on our expert teams' inputs.

Analysts' Choice: Often, investors want to choose their funds for some particular investment purpose. There are 1,590 funds available to you, and even with the help of our rating system, it's a lot of work to zoom in to the right set. However, that won't be a problem for you because, as a Premium member, you will have access to Analysts' Choice. Instead of the 39 official types of funds, we have created eight investor-oriented categories which match precisely with the actual financial goals that you have. In each of these, my analysts and I have carefully selected a handful of funds to serve you with the best outcomes.

Of course, this is just the beginning, and there's a lot more to Premium. So, head over to Value Research Premium (vro.in/premium), get more details of these features, see glimpses of what Premium has to offer, read testimonials of our members and start managing your investments right away!


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