I have been investing in mutual funds since the last 3 years. When should one change the funds one is investing in? The performance of funds keep changing every year, should we keep reshuffling?Asked
Once the mutual fund portfolio is designed, it requires maintenance for obtaining a balance in returns or for an effort to increasing them. Well, are these the only reasons to consider required changes in a portfolio? No, there are other reasons too. Simply putting it, whether we consider stocks or bonds, they do not perform in a similar fashion over a period of time. There is always a combination of lows and highs. Hence there is always a risk associated and to mitigate the risk, mutual funds require constructive changes in their portfolio.
Now, how frequently such changes are required is the question. Changes are done when there is a significant change in return requirement, investment requirement, fund underperformance, or investment time-horizon, fund objectives or risk tolerance of an investor.
Let us consider different situations where a change is required and what impact it will have on the portfolio:
These are the major situations which ask for a requirement in changes to mutual fund portfolio. Apart from these, if investors want to consider inclusion of new funds in portfolio, then they should seek advice from fund and portfolio advisors.