Quora Answer: How Do I Check My Mutual Fund Performance?

The following is my answer to a Quora question: “How should I check my mutual fund performance, and change it accordingly?”

If you have invested in a mutual fund, I would assume that the entity through which you made the investment would send you a regular update.  Some do it monthly, some quarterly.  It comes from the fund manager, and there is a short analysis on performance and projections.

It is always good to look at your return over the last year, and from inception.  This gives you an idea whether your investment is at least above the rate of inflation.  If it is not, you might either have to adjust the weightage of the fund between debt and equity instruments, or divest altogether.  In considering this step, you have to remember that a paper loss will becomes a realised loss.  If there is a possibility of recovery, you should consider that.

You should also pay attention to what you are investing in, the fund mandate and the prevailing conditions that may arise.  If, for example, you expect volatility is a specific market, then it would be good to shift funds out of that region.  This may not always be necessary.  If that volatility is short term, and your investment horizon is long, it might actually be a good opportunity to increase your position at a bargain, particularly if you have confidence in the long-term performance of the fund.  If you are expecting turbulence across all markets, or even a recession, your options include shifting to money market for greater liquidity, or a defensive strategy of shifting heavily to bonds.

In making any of these decisions, it would be preferable to get an experienced investment banker of financial advisor involved, depending.  Too much fund rebalancing also incurs costs, and they can add up.  Shape your portfolio according to your investment horizon well, and make any adjustments incremental.