How to improve your MF portfolio performance?

Many investors might have noticed that the returns shown by the MF schemes in which they have invested do not match with what they have got by investing in the same fund. The reason why there is such difference can be attributed to the behavioural bias of an investor. 

As an investor, you are plagued by many biases such as anchored bias, recency bias among others. Similarly emotions such as greed, fear, anger also influence your investment decision. If you can have control over them, you will be able to make a rational decision, not just in life but also with your investments. It is a difficult task and that's the reason one hires a financial advisor to make rational decisions on your behalf.

In this article, we will list down some of the strategies that can be used to get better risk-adjusted returns from your investments. 

 Diversification 

It is very hard to predict future returns of an asset class and hence the best tool to manage such risk is diversification. It helps you to avoid the risk of dependency and concentration in a single asset or fund. Diversification distributes your investment across different asset classes such as equity, debt, gold, etc and within asset classes among various sub-categories of these broader asset classes. 

Active management 

If your sole idea is to create wealth through investment, then actively managing your portfolio makes more sense than passive management. The passively managed portfolio will give you maximum market returns. Therefore, for wealth creation, actively managing your MF portfolio would be a wise decision to keep a tab of what is happening in the economy and how to make a tactical investment decision. 

Actively review your portfolio 

Reviewing is very crucial. Your investment to requires constant monitoring. This is because when you had invested in a fund, the thought process and market dynamics can be different from what it is now. Hence, reviewing your MF portfolio stands vital. This will help you to have a timely exit from the fund before it witnesses a deep cut in returns. Reviewing activity also helps you to re-align your portfolio as per your financial goals.