3 Key Things to Do for Better Returns from Mutual Fund Investments.. LD BOOPALAN, Munnetram Capital

3 Key Things to Do for Better Returns from Mutual Fund Investments..!

LD BOOPALAN, Co- Founder, Munnetram Capital

Mutual Fund Distributor, Insurance Advisor.

Certified Financial Goal Planner

ARN-108075

Many investors believe that if they invest ₹15,000 every month through a SIP in an equity mutual fund and wait for 15 years, they will automatically accumulate crores of rupees.

However, mutual fund investing is not something where you simply invest money and forget about it.

It is more like maintaining a fruit garden. Planting a sapling and watering it regularly is not enough. You also need to add nutrients, remove dried leaves, protect the plants from pests and periodically check their health. Similarly, equity mutual fund investments need to be reviewed and adjusted from time to time to achieve better long-term results.

The Reality of Mutual Fund Investing

A mutual fund is not like a bank savings account or fixed deposit. Its value fluctuates with market movements. Therefore, long-term wealth creation requires not only disciplined investing but also disciplined monitoring.

Key Action	Why It Matters
Review investment performance regularly	Helps identify funds that are consistently underperforming
Maintain the right asset allocation	Helps balance risk and return
Rebalance periodically	Helps protect profits and keep investments aligned with financial goals

1. Review Your Investment Performance Regularly

After investing in an equity mutual fund, it is important to review its performance at least once a year.

Suppose the overall market has delivered an average return of 13% over the past three years, while your mutual fund has delivered only 7%. Instead of immediately switching to another fund, you should first understand why the fund has underperformed.

Factors such as the fund's investment strategy, portfolio composition, market conditions, fund manager changes and performance compared with its benchmark and suitable peer funds should be considered.

If persistent underperformance is due to fundamental reasons, switching to a more suitable fund may be considered.

The key point is that reviewing a fund does not mean reacting to every short-term fall or rise. Equity funds should be evaluated over an appropriate time period and against relevant benchmarks and peers.

2. Maintain the Right Asset Allocation

Many investors invest more money in a fund simply because it has recently generated high returns. This can be risky.

For example, after seeing strong returns from small-cap funds, an investor may put a large portion of the portfolio into small-cap investments. This can significantly increase portfolio volatility.

Your asset allocation should depend on factors such as your age, income, financial responsibilities, investment horizon, risk tolerance and retirement goals.

Money can be distributed among different asset classes such as:

· Equity and equity mutual funds.

· Fixed-income investments such as fixed deposits and bonds.

· Gold-related investments.

· Other suitable investments based on your financial goals.

For example, a 30-year-old investor with a long investment horizon may be able to allocate a larger portion of the portfolio to equities. On the other hand, a 55-year-old investor approaching retirement may need to give greater importance to capital stability and fixed-income investments.

The right asset allocation is not the same for everyone. It should be based on the individual's financial situation and goals.

3. Periodic Rebalancing Is Essential

When some investments grow faster than others, their share in your overall portfolio can increase significantly. This changes the asset allocation you originally planned.

For example, suppose your target allocation is:

70% equity + 30% debt

After a few years of strong equity-market performance, your portfolio may become:

85% equity + 15% debt

Your portfolio is now taking more equity risk than you originally intended.

In such a situation, you may consider reducing some equity exposure and increasing the debt allocation to bring the portfolio closer to the original 70:30 target.

This process is called rebalancing.

Rebalancing can help maintain the desired level of risk and prevent a portfolio from becoming excessively concentrated in an asset class that has recently performed well.

Common Mistakes Made by Mutual Fund Investors

One of the major reasons investors fail to achieve their expected returns is making emotional decisions at the wrong time.

Common mistakes include:

· Stopping SIPs when the stock market falls.

· Investing in new funds based only on recommendations from friends or social media.

· Putting too much money into one category of mutual funds.

· Not reviewing investments for several years.

· Investing without clearly defined financial goals.

· Chasing funds that have recently delivered exceptionally high returns.

These mistakes can significantly affect long-term wealth creation.

A Simple Example

Suppose an investor invests ₹10,000 every month through an SIP for 20 years.

Particulars	Value
Monthly SIP	₹10,000
Investment period	20 years
Total amount invested	₹24 lakh
At 10% annualised return	Approximately ₹76 lakh
At 12% annualised return	Approximately ₹99 lakh
At 14% annualised return	Approximately ₹1.31 crore

These figures are illustrations, not guaranteed returns.

The example shows how even a few percentage points of difference in long-term annualised returns can create a substantial difference in the final corpus because of the power of compounding.

However, investors should not try to achieve higher returns simply by taking excessive risk. The objective should be to earn appropriate risk-adjusted returns while staying aligned with financial goals.

An Annual Investment Health Check

Once a year, investors can review their portfolio by asking the following questions:

· Are my financial goals still the same?

· Is my mutual fund performing reasonably compared with its benchmark and suitable peers?

· Is my equity-to-debt allocation still appropriate?

· Am I overexposed to any particular category or sector?

· Has my risk tolerance changed?

· Are my investments still suitable for my time horizon?

· Will the portfolio help me meet my financial goals over the next five to ten years?

Answering these questions honestly can help improve the quality of your investment decisions.

Investment Discipline Is More Important Than Emotion

Success in equity mutual fund investing does not depend only on selecting the right fund.

It also depends on how long you remain invested, how consistently you invest, how regularly you review your portfolio and whether you make appropriate changes when necessary.

When markets rise, greed can influence investors. When markets fall, fear can take over. Both emotions can lead to poor decisions.

Successful investors generally follow a disciplined approach. They continue investing according to their financial plan, review their portfolios periodically and make changes based on facts rather than short-term market emotions.

Conclusion

Equity mutual fund investing is not a magic formula where planting a seed automatically turns it into a large tree. It requires patience, discipline and periodic monitoring.

If you want to improve your chances of achieving your long-term financial goals, focus on three important habits:

1. Review your mutual fund investments regularly.
2. Maintain an appropriate asset allocation.
3. Rebalance your portfolio periodically.

When these three habits are followed consistently, mutual funds can become more than just a savings vehicle. They can become an important tool for long-term wealth creation and financial security.

For details and Investing

LD BOOPALAN, Co- Founder, Munnetram Capital

Mutual Fund Distributor, Insurance Advisor.

Certified Financial Goal Planner

ARN-108075