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Dear Qualified Financial Advisor,

Last year, I started looking for investment options that help with having passive income but don’t involve too much risk. I’m new to this, so I decided to invest in a couple of long-term mutual fund schemes that my friends and family suggested. Now that it’s been some time, I’d like to review the performance of the funds, but I’m not sure about how to tell the difference between good and bad investments. How do I monitor, evaluate and reassess my mutual fund investments in order to make sure I’m on track to grow my wealth and beat inflation? How often should I do this?

My best,
A Wealth Seeker

Dear Wealth Seeker,

Now that you have bought the tickets, even if it’s based on suggestions by your friends and family, it is advisable to complete your roller-coaster ride. I say this because long-term funds are — as the name puts it — a long, winding journey. The best way to judge your existing investments would be to check the benchmark of the said schemes, and to look for comparisons with their peers’ performance for the same time frame.

If your investment fund has underperformed compared to its peers, but is still beating its benchmark in the long term, you can stay put. On the other hand, if your fund has underperformed both its benchmark and peers, it may be time for a rain check.

All said and done, you should be undertaking this evaluation on a yearly basis and not frequently, as volatility is the nature of markets and the same stands true for a long-term equity fund too. Make sure you don’t do this assessment before a year is up (so that it’s not too soon), or later than 30 months — finding a sweet in-between spot to assess the performance of your investments would be a good strategy.

Last but not the least, just like a very good medicine doesn’t cure all ailments, a well-performing scheme may or may not suit your needs or risk appetite. Therefore, it’s always wise to get your portfolio vetted by someone who is qualified so you get an expert opinion and a clear path for your future investments.

As I like to say, mutual funds sahi hai, per QFA zaruri hai!

Priyesh Sampat

By Priyesh Sampat

Chief Learning Officer, Sampat Investments

Priyesh Sampat is a Certified Personal Financial Advisor and Registered Financial Consultant with over a decade of experience in providing financial advice.

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