How well do you manage your portfolio?

How well do you manage your portfolio?1) How frequently do you invest?a) Regularlyb) SporadicallyCorrect answer: aAs an investor, it is necessary to invest on a regular basis in order to create a large corpus later on in life. An efficient portfolio management process can be done monthly, quarterly, or even semi-annually. Greater consistency in investments offers higher potential to earn greater returns.2) Have you made any investments that you do not understand?a) Yesb) NoCorrect answer: bIt is important that you avoid investments that you don’t understand. Warren Buffett too recommends this course of action. Invest in funds that you are well aware of, so that you are always in control of your investments. Many reputed financial institutions offer portfolio management services in India that you may want to consider.3) Diversification is:a) Necessary for a portfoliob) Unnecessary for a portfolioCorrect answer: aDiversification is absolutely necessary if you want to avoid huge losses. By investing in different asset class like gold, equity and bond, you can minimize your chances of losses in case stock markets sink. Therefore, even if one or two funds perform badly, the other funds can help compensate the total losses of the portfolio. You may want to speak to your financial advisor on the different types of portfolio management for your profile.

4) More the funds, better the portfolio?a) Yesb) NoCorrect answer: bA higher number of funds in a portfolio do not necessarily translate to better returns. It is a good practice to maintain different funds in your portfolio for the sake of diversification. But that does not mean you should populate your portfolio with a number of funds. Eventually, it could become tough to manage the portfolio overall. Speak to your financial advisor to know what is portfolio management services and how it can benefit you.5) Do you monitor your portfolio?a) Yesb) NoCorrect answer: aHaving made necessary investments, you must monitor your investments periodically to see how they are performing. Review your funds regularly in order to ensure that their performance matches your goals and expectations. In case they underperform, it may be time for a change.6) Do you alter your portfolio composition frequently?a) Yesb) NoCorrect answer: b) NoIt is important to monitor and rebalance your portfolio once in a while. On the other hand, frequent changes in portfolio composition could impair your returns. Once you have a well-balanced portfolio, it would be best not to alter it unless required. Helpful portfolio management tips from your financial advisor can go a long way in building wealth to meet your goals.7) Do you give time for the fund to deliver returns?a) Yesb) NoCorrect answer: aDifferent funds require different amounts of time to grow and deliver returns. Hence, it is essential to wait for a certain amount of time to reap in the benefits. For example, it may be unwise to dump a long term investment based on its short term performance. 8) Do you act on unsolicited investment tips?a) Yesb) NoCorrect answer: b) NoIt is important not to invest based solely on unsolicited tips. Always conduct your own research before investing in any fund.9) What is asset allocation?a) Investing in different funds to earn high returnsb) Investment strategy that helps to balance risk and returns of a portfolioCorrect answer: bAsset allocation is a strategy used by investors to maximize their returns based on their investment goals, investment horizon and risk appetite.10) Do you go for funds that are at the top of the performance table?a) Yesb) NoCorrect answer: bIt can be tempting to invest in funds that have a good track record. Unfortunately, past performance is not an indicator of future performance. Thus, investing in a fund simply because it has performed amazingly well in the past 52 weeks may not be such a good idea after all.

FINAL SCORE:How did you score?0-3: You may want to read through and understand the chapter on portfolio management once again. Or, speak to one of our experts for better understanding.3-6: You’re half-way there on understanding the importance of managing a portfolio. Keep up the good work. But work on mastering the different aspects of portfolio diversification. 6-9: Excellent! Review the few wrong choices and a quick read on those chapters can work wonders for you. 10: Congratulations! You are now ready to start managing a portfolio all by yourself.