Start your Swachh Portfolio Abhiyan!

Of all the initiatives launched by the PM, the Swachh Bharat Abhiyan could be the one set to have the greatest impact on the lives of ordinary citizens. The campaign which launched on 2^nd October 2014 with much fanfare - the PM himself was seen wielding a broom sweeping a street in New Delhi - has the vision of having a ‘Clean India’ by 2nd October 2019 the 150^th birth anniversary of Mahatma Gandhi.

Cleanliness is essential in all walks of life. Even smartphones, which have become integral part of our lives today, need frequent system cleaning. There are apps which free up space and improve performance. In fact all systems, from electronic to biological, need regular clean up to function properly. Investments too are subject to this universal requirement. Your investments need a Swachh Portfolio Abhiyan (or SPA)!

Having a swachh portfolio will contribute to your financial health and wealth in more ways than one. Apart from helping you review and monitor your investments better it can save money from going into unproductive financial products and improve overall returns. Here are 3 steps how you can achieve a clean portfolio.

Organize your investment accounts
The first step is to take stock of what investments one owns. Your portfolio includes all the PF accounts, FDs, insurance policies (except term insurance), mutual funds and shares that you may own. You would receive statements from them regularly or in some cases on demand. Maintain a file to keep them separate, in the electronic or paper form or both. And have at least one family member know about this file.

In an excel spreadsheet you can again organize investments on the basis of asset class as equity, fixed income, gold related. This will help you monitor their performance and view your investments as a whole portfolio instead of as individual mutual funds, shares, FDs etc.

Consolidate investments where possible
Living in the materialistic age we often tend to accumulate more than we need. The first exercise above might amaze us about the sheer number of investment schemes/policies/accounts we hold. A closer look might suggest we are overexposed to certain investments than we should be or underweight in others. Probably some of the funds we added to “diversify” have turned out to be duplicates and an overlap.

So you’d have to consider if your investments need a trim. What are the key areas to decide which ones to keep from similar investments? We believe it should be
i. Pedigree
ii. Fees and expenses

Fees are often an overlooked aspect of investments but choosing a product that is efficient in keeping costs low is very important. The rest, i.e. performance would follow process and pedigree. By the way, a Fund of Funds is a simple way to diversify your equity schemes without adding clutter.

If you have multiple folios (the mutual fund equivalent of account number) then you can consolidate folios into one. This will simplify to a great deal the task of managing those investments.

Rebalance when required
With lapse of time the neat, trim portfolio might again gather dust and weight. Investments that at one time were great for you might no longer be a fit. Or the fundamentals of a scheme may have undergone change. On rare occasions you might have to close out an investment at lower than expected returns to avoid worse scenarios. At times the changed market dynamics might require that you modify your asset allocation pattern.

Now to rebalance the portfolio properly one needs to make investments goal-linked. When you reach the goal sell off your investment and move it to safer, liquid destinations. Don’t let greed or fear stand in the way. At Quantum we adhere to this discipline of buying or selling stocks on reaching price targets irrespective of external conditions. For successful investments you too must practice this.

A clean and lean portfolio makes a healthy portfolio. Tackling these three points might not be possible in a week or even a month but starting off with them would be a nice way to end the year 2014! Do consult a financial adviser for your investment needs.

Above article is authored by Quantum.

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