Mutual Funds are a source for investors who seek to invest their money in various schemes like stocks, bonds, etc. with an expected rate of return balancing the risk involved. Since investors invest their money with an expectation of outcome, Asset Management Committee (AMC) makes sure to keep a watch on the functioning and protect the interest of the investors. The Capital market regulator  Securities Exchange Board Of India(SEBI) maintain strict norms and tightly regulate the market. Even with the tight security, an investor is suggested to read all the documents carefully and should know and get what he’s communicated.

Is tracking necessary?

We have a perception that investing in mutual funds is do-it, forget it an affair in a secure environment, so why there is a need to track? Well, the systems and controls make sure that your money is handled prudently and carefully but it is your duty to ensure that you keep a tab on investments whether they are relevant to your goals or not and you get what you expected or ensured to get. Few ways we’ve talked about how you should track your investments

1) Keep track of performance

Mutual Funds have an identified benchmark which is used to compare the performance and compete with other similar schemes available in the market. So it is necessary to evaluate the performance of your funds after a certain period with their own benchmark and compare it with other similar funds. The framework of the fund mandate and the behavior of a financial market should be kept in mind while evaluating and comparing. Comparing your funds with other similar funds with similar investment should be done to see the real picture.

2) Monitor Investment Style

While investing in a Mutual Fund, the investment style and strategy may be clearly mentioned in Scheme Information Document Fund(SID) in your fund and you can refer it to see a better and real picture of the scheme. Sometimes a fund may have claimed to invest in a certain value approach but gradually veer to a growth style, so you need to keep a track of the style integrity of your funds. The change in style can also lead to a change in the overall risk profile of the fund.

3) Fund Manager Change

The role of a fund manager is to show security selection skills that add value to a portfolio.  A fund manager does impart his own touch and expertise to the fund performance. So, there is a need to keep track of your funds if the Fund Manager changes, you may need to evaluate the changed investment style of the manager.

4) Portfolio Holdings

You need to keep track of the concentration of the fund’s top 10 or 25 holdings. If the proportion is too high, it may indicate an extra risk to the portfolio. If the proportion is too low, it may indicate too many holdings which may not be optimal. The quality of parameters should also be assessed by monitoring parameters like equity fund, credit quality, etc.

From where you should grab the information?

This tracking process is not as complicated as it seems. There are tools which you can use-

1) Fund House documents like fact sheets, investor newsletters are a rich source of information. They disclose all the required information on your mutual fund schemes. One can also refer to Scheme Information Document(SID) or Key Information Memorandum(KIM) issued by the fund house.

2) Online Tools provide dedicated information and opinions on various mutual funds and also provide the facility for creating a portfolio that is given on their websites or financial portals. You can also get current status as well as depth analysis with expert views on your holdings.

Related Topic: Debt Mutual Funds

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