Simple rules to enhance your MF investments

Every investor wants his investment to outperform. The mutual fund arena is well-known for steady returns in the longer term. But it too needs some diligence and planning to achieve maximum returns.

In the current market situation, investors need to visit their portfolio periodically. During this, there are some simple things which an investor can do to avoid the losses or we can say optimize the returns. Let's check the simple rules to follow while rebalancing which can enhance the performance of your mutual fund portfolio.

Assess your risk appetite

The first and the most important rule is to assess the risk appetite while adding investment to the portfolio. The investor should decide how much risk he can take on his investment. This is crucial as this will determine the asset allocation for the investor. That is if an investor is a risk-averse investor then he will go for debt securities rather than equities and allocate more in a manner to protect his returns. On the other hand, the investor who is aggressive and aims to create wealth he will allocate more to the equities rather than the debts.

Diversify

Usually, investors see diversification by the funds among the stocks and securities. But investors should diversify the investment among various asset classes. This always benefits the investors for minimising the risk as the asset classes complement each other in the various market conditions.

Rebalance

It's not enough to just diversify the investment, but even rebalancing the portfolio is important. As your investments grow over a period of time and the investment ratio changes accordingly, so the investor should rebalance it to stick to the investment goal. This will indirectly suggest that investor should book profit on overvalued assets and redeploy it in undervalued assets.

Always review funds based on their benchmark

Many a times investor compare the cross-sectional funds or consider the performance of the mid-cap fund over large-cap fund. This means the investor is chasing the returns only. But this won't be a good method to evaluate the funds as this may deviate the investor from his investment goal. So the investor should always review funds based on its benchmarks or the similar category funds.

By following the above rules, an investor can protect himself from a bad decision and also can enhance the performance of the portfolio by evaluating these periodically.