The Art Of Portfolio Management

It’s not enough to simply invest. As an investor, you will not be able to make the right gains and cut back on losses or achieve your financial goals unless and until you monitor your portfolio regularly and learn the tricks of rebalancing it to stay on top of the game

“You aim for the palace and get drowned in the sewer.” So said author Mark Twain. And it’s something that applies well to your investment as well. In recent times, a majority of investors looking at their portfolio would be staring at huge losses, especially if they had started investing only over the last three years. With the exception of a few sub-categories such as international, pharmaceuticals and MNCs, all the other categories of equity-dedicated funds are on an average yielding negative annualised returns in the last three-year period. Even if we extend the period of study to five years, the returns generated are not exceptional and below the bank fixed deposit rate, thus barely beating savings account rate of interest.

The real returns for many investors would be even worse than what is being reflected in the above graph as they would have been trying to time the market and chase returns. So is there any way through which investors could have improved the performance of their portfolio? Yes, the logical alternative to performance chasing and market timing is structuring a long-term asset allocation plan and then staying on that course. Many a time, sticking with an asset allocation plan is hard to do as it may require some counter institutive action. For example, it may ask you to sell performing assets and buy underperforming assets. At times like these, it calls upon your confidence to use your knowledge and stay on the chosen path.