Mutual Fund Portfolio: 3-Click Journey To Strengthen It

Mutual fund investment has now become one of the best ways to invest your money and earn returns. Over the last few years millions of new investors have started investing in mutual funds and older investors have diversified their portfolio by investing in additional funds.Having said that, there is actually data that suggests that most investments made in the last couple of years have not performed well. In fact, these investments are said to be incurring losses of close to 25%.So practically speaking, if an investor has invested Rs. 100,000 a year back, the current value with an assumed loss of 25% stands at Rs. 75,000 only! If a mutual fund is generating that much loss in an entire year, then there is no denying the fact that there is something wrong with the mutual fund.So, investors who chose these funds are now looking for ways to recover their losses in any way they can. But that can be extremely difficult because the current value of the investment, i.e. Rs. 75,000, must first come back up to the principal invested amount of Rs. 1,00,000, which is highly unlikely.

So,what is the reason for poor performance of these funds? One can say that the current market conditions are not very favourable and hence the funds are not performing well. But this is not completely true. It can be agreed upon that the current market dynamics have let the funds down to an extent. But the major reason that these funds have not performed well lie somewhere else.Let us clear it out.In our research of all the major mutual funds across various categories, we found that almost all of them have incurred losses between 5% to 25% in the last couple of years. To inspect further, we decided to look at the actual funds that most AMCs hold and decided to evaluate their quality.It was found that most AMC mutual funds have a maximum percentage of invested funds in 1-star and 2-star funds. The percentages invested in 4-star and 5-star funds were very less. So, in essence, most AMCs are investing in funds that are very low in quality, have a poor portfolio and a bad market resilience.Therefore, it can be surmised that the poor performance of these mutual funds cannot just boil down to poor market conditions, but the poor quality of the funds themselves.Keeping your funds invested in the same schemes will not only bar you from recovering your losses, but also lead to continuous loss of your investment .So, what can one do in such a scenario? Is there a solution that can allow you to stop your losses and start your road to recovery?We’re happy to say that yes, there is an option where you can stop investing in bad funds and start investing in good funds, thus improving your returns.With the simple, 3-click solution of Smart Switch, you can eliminate poor funds from your portfolio and replace them with good quality funds.

Fund switching is nothing but the process of re-allocating your investment from one fund to another. With smart switches, you’re basically shifting your investment from a poorly performing fund to a better one.Smart switching is basically a 3-click process, where the system analyses your current portfolio, identifies the poorly performing funds, and recommends you to replace them with better funds.

1) Upload your e-CAS (Consolidated Account Statement) for analysis and check your exciting portfolio score. The system will analyse all the funds that you’re invested in and give out a score. The score represents the quality of funds that you are invested in.2) Based on your submitted e-CAS, we will recommend to you a group of higher quality funds that can replace the poorly performing funds in your portfolio. You can review the recommendation provided and study the funds that have been chosen.3) If you feel that the recommended funds would in fact improve your portfolio, then you can apply the recommendation to your existing portfolio and switch to quality mutual funds. This way, you can replace poor quality funds with better quality ones.Thus, with 3 simple clicks, you can first find out whether your portfolio contains good quality funds and check your score. In case it is identified that your portfolio score is low, and it contains a high percentage of poor quality funds, we will recommend better funds that you can replace them with.Once you review our recommendation, you can easily apply them to your portfolio and immediately switch to better quality funds. This will immediately stop your losses and help you generate better returns like you always wanted to.The question also arises, what if you had originally invested in good quality funds? Would it have made a difference? The answer is a resounding yes. Good quality funds are much more stable and resistant to market fluctuations. So, in times of economic crisis like the current one, poorly rated funds incur more losses.For example, if our Rs. 100,000 invested incurred losses of Rs. 25,000 in a poor quality fund, we’d be left with Rs. 75,000 of our principal amount. If your funds were of a higher quality in the same economic crisis, your investment would have suffered a loss of not more than 8-10%, which is considerably lesser. So, you would still have Rs. 90,000 of your principal amount, despite the major economic crisis.

Investing in poor quality funds can really affect your returns and lead you to incur heavy losses. To avoid this, always look for the particular schemes included in the mutual fund. It should have a good percentage of high quality 4-star or 5-star funds. Currently, most mutual funds contain only 5-8% of high quality funds while the rest (80%) are poor quality funds. If, however, you have already invested and are looking to find a solution, you can now rest assured that the switching option can enable you to quickly reduce your losses and change your portfolio.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.