7 Situations in which you Should Review you Investment Plan

The reason we invest in various investment tools is because we aspire to create wealth in the long run. But what is the point if your investments are not living up to your expectations? If you are not getting the desired results that means either your choice of investment is incorrect or you are not investing enough. These are not the only two reasons, sometimes there are things which are not in our hands like an ever growing pandemic or international political unrest. But if you want to be successful with making money through savings and investing, you need to be effective with financial planning.

The main thing while financial planning is identifying your short term goals and long term goals so that you can prioritize your investments. Any investor will not invest in any scheme that is beyond their risk appetite. A risk appetite is an investor’s ability to face losses and wait for the scheme to once again start making profits. There are some investors who are completely averse to taking risk. Such individuals usually settle for investment schemes offering lower but fixed interest rates. Then there are others who are willing to take some risk. And finally there are aggressive investors who go the extra mile investing in schemes that have high risks rewards ratio (where the rewards are never guaranteed). Such investors have the option of investing in mutual funds.

What is a mutual fund?

A mutual fund is a pool of professionally managed fund where the fund manager must apply a strategy to buy and sell securities in accordance with the scheme’s investment objective. What fund houses do is that they collect money from investors having a common investment purpose and invest this pool of funds across the Indian economy. The money is invested in equity and money market instruments like, government bonds, debt securities, certificates of deposits, call money, etc. The performance of a mutual fund may depend on the performance of its underlying assets. Mutual fund investors receive shares in the form of units in quantum with the money invested and depending on the fund’s existing net asset value (NAV).

Like we said earlier, mutual funds may hold the potential to help investors get closer to their financial goal, but there can be situations when their investments may fail to take off or take a serious hit are a few months.

Here are few situations when you should consider reviewing your mutual fund investments:

1. If there is any uncertainty in your investments: During turbulent times when there are serious fluctuations happening in the stock market on a daily basis, it may be time to review your investments. It would be considered sensible to review your portfolio before the fluctuations harm your investments to a larger degree. Why wait till the market crashes when you can potentially rebalance your portfolio beforehand?

2. After a budget briefing: The union budget which is announced annual before the end of the fiscal year may prove to be another factor that may lead you to reassess your investment portfolio. There are times when the new budget brings in new tax regulations which may affect your capital gains at the time of redemption. Some mutual schemes may attract more tax while some others may attract less tax post a budget. Hence, as an investor you may not only have to review and rebalance your portfolio but might need to stay abreast with all the changes that the annual budget may bring in.

3. Reassess at the end of the financial year: If your gross income is taxed and your existing investments are not proving to be sufficient, you might have to review your investments. Saving tax is essential and one must always include tax planning in their financial planning. However if you miss out on the same and need to make last minute investment changes, a scheme like ELSS might come to your rescue. ELSS is a mutual fund scheme that comes with a three year lock in and a tax benefit. You might be able to reduce your tax liability by investing in ELSS.

4. In case of loss of monthly income: The corporate jobs in multinational companies have no security. During a global financial crisis, companies may lay off some employees and unfortunately if you happen to be one of them, you may have to review your investment plan. Since your monthly income will come to a standstill, your risk appetite may also reduce and hence in such moments one may have to review their mutual fund investments.

5. Permanently shifting abroad: If you happen to be in a situation when you may have to shift permanently to another country, you may have to reprioritize your goals. Hence, investing in schemes may not be your top priority. In fact, you may have to withdraw or redeem some of your mutual funds as there will be expenses that you will have to bear.

Apart from these situations, you may review your investment plan quarterly, every six months or once a year to make sure that your investment schemes are living up to your expectations.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.