Many investors often find it difficult to know if they are investing aligned with their financial goals and if the portfolio is working in its favor. Stage assessments by a service like the Portfolio Doctor evaluate the fitness of fund choices for investors to help them determine the status of their portfolios in alignment with their personal financial objectives. In fact, the service gives suggestions based on the funds’ performance, the risk tolerance of the investor, and long-term financial goals.
Let us now illustrate the operation of Portfolio Doctor for an actual case, wherein the investor, Sunil Babar, is keeping funds ready for his children and is also planning for early retirement.
Portfolio Review:
Investor Profile:
- Sunil Babar has invested in mutual funds, insurance schemes, and fixed income alternatives for about 15 years.
- He has a disciplined approach towards regular investing to build a reasonably large portfolio.
- With only marginally increased annual Systematic Investment Plans (SIPs), Sunil can meet all his financial goals.
Current Portfolio Health:
- Most of his investments are doing quite well today, with clearly some areas that need revival.
- Some of his investments are in thematic and sectoral funds, which are quite unpredictable. One could argue that for reasonable growth, it would be prudent to put more money into diversified schemes, which tend to be more stable.
- Fixed deposits are quite safe but not very tax-efficient concerning returns being taxed; therefore, as recommended by The Portfolio Doctor, it would be better to invest sale proceeds into debt funds or arbitrage schemes for tax-efficient returns.
Main Recommendations:
Retirement Planning:
Sunil should look to defer his retirement plan through to the age of 50, giving him three extra years to accumulate funds for a more comfortable retirement.
NPS Opening:
Opening an NPS account is greatly advocated as a tax-saving device and for the creation of a retirement corpus. The idea is that with an aggressive allocation, i.e., more than 50% of the funds in equity, better returns can be achieved in the long run.
Emergency Fund:
It is critical to start building an emergency fund that will cover unexpected expenses. This fund should be liquid and provide coverage for at least six months’ living expenses.
Insurance Coverage:
The doctor advised the security of adequate life insurance coverage for Sunil, to the tune of ₹2 crore or higher, with a view to providing financial safety for the family and guaranteeing fulfilment of the financial goals, should any unforeseen event occur.
Stock Investments:
It is always risky to invest in stocks which tend to be unpredictable, especially for long-term goals. The Portfolio Doctor recommended that he switch to mutual funds which provide diversification and are more aligned with his goals.
PPF Account Extension:
Sunil’s Public Provident Fund (PPF) account is about to mature. Instead of withdrawing the money, it is suggested that he extends the PPF for another five years to remain benefited with tax-free returns.
Review and Rebalancing of Investments:
Periodic reviews and rebalancing are an ongoing necessity. Sunil should be reviewing his portfolio at least once a year to make sure that his investments are converging toward his goals. Moreover, as the financial goals are approaching, it becomes vital to lower the risk in the portfolio to ensure he does not miss his target.
Next Steps for Portfolio Review:
If you want the Portfolio Doctor to check your portfolio, he informs you of the next steps:
- Subject: While writing in, please use “Portfolio Doctor” as your subject line.
- Details to Reveal:
– The names of the funds you currently hold.
– The current value of your investment.
– If you have any mutual funds under SIP.
– The objective for investing in each goal.
– How much do you need to realize each goal?
– What is the time horizon for each goal?
The Portfolio Doctor will evaluate your portfolio based on these details and provide you with specific recommendations on how to best manage your investments and get you on your way to achieving your financial goals.
By conducting periodic performance evaluations and realigning your investments, you are ensuring that your portfolio is recalibrated toward fulfilling your changing financial objectives. Contact us today and get an expert appraisal to keep your portfolio in good shape for the future!