Invest and forget! Thatโs not how investing in mutual funds works. Instead, it is an ongoing process that requires regular assessments. While your idea may be to stay invested for the long term, it is important to review your mutual fund portfolio periodically.
But why? Thatโs because both the market and your financial goals arenโt static! Over time, your investment objectives, income, and risk-taking ability may change. Similarly, the market conditions also shift, which can affect how your funds perform.
Thus, you must make periodic analysis of your mutual fund portfolio to see if your investments are still suitable for your goals and current financial situation.
Okay, but how to do this? Read this article to learn five different ways you can review your mutual fund investment plans in 2025.
5 Techniques to make a thorough Mutual Fund Portfolio Review in 2025!
If you are a serious long-term mutual fund investor, ideally, you should review your portfolio at least once a year. Such a yearly review allows you to:
Spot underperforming funds
Check if your asset allocation is suitable as per your financial goals
Decide whether you need to add, switch, or reduce any investments
Additionally, regular reviews also keep you informed about the latest market trends. Need assistance? Below are five techniques you may follow in 2025 to make a detailed analysis of your mutual fund portfolio:
1. Compare Each Fundโs Performance with Its Benchmark
Start with a detailed mutual fund comparison. Check how each fund has performed compared to its โbenchmarkโ.
For those unaware, a benchmark acts like a reference point and shows how well a mutual fund is performing in comparison to the overall market or a particular segment. For example,
Large Cap Category Fund uses the Nifty 100 as its benchmark.
Now, this means the fundโs returns are compared against how the Nifty 100 has performed over the same period.
How to Apply This Review Technique?
Firstly, check your fundโs benchmark on its factsheet on the AMCโs website. Then, compare the fundโs returns with the benchmarkโs returns over different time periods, such as 1 year, 3 years, 5 years, and since inception. Now, there could be two possible scenarios:
| Scenarios/ Aspects | A) Fund โOutperformsโ Benchmark | B) Fund โUnderperformsโ Benchmark |
| What does it mean? | If the fundโs performance is higher than the benchmark, it shows that the fund manager has added value by making smart investment decisions. | If it regularly underperforms, it means the fund is not keeping up with the market expectations. |
| What can you do? | You may continue with the scheme. | You may need to review whether it still fits in your portfolio. |
2. Check the Fundโs Expense Ratio
Every mutual fund charges a small yearly fee called the โexpense ratioโ. This covers the cost of:
Managing and running the fund
Administrative charges
Operational expenses
Usually, it is shown as a percentage of your total investment. Please note that even though it may look small, a higher expense ratio can reduce your overall returns over time.
How to Apply This Review Technique?
Compare your fundโs expense ratio with the average ratio of similar funds in the same category. For example, if most funds in your category charge 1%, but your fund charges 2%, thatโs worth noting!
Be aware that passive funds usually have a lower mutual fund expense ratio because they simply track & replicate the market without Fund Managerโs Active Investment Strategy.
Now, in contrast, actively managed funds charge higher expense ratio. However, that extra cost is only reasonable if the fund regularly performs better than its benchmark.
3. Review the Fundโs Past Performance
Before continuing with any type of mutual fund, it is important to see how it has performed in the past. By studying a fundโs history, you can learn how it has handled different market situations (both when the market was rising and when it was falling). Ideally, a fund that performs well in both good and bad times may be preferred.
Note โ The past performance of the mutual funds is not necessarily indicative of future performance of the schemes.
How to Apply This Review Technique?
Check the fundโs performance over different time periods, such as 1 year, 3 years, 5 years, and since inception. Now, compare these results with other similar funds. You may obtain any of these two results:
| Results/ Aspects | Result I: Your Fundโs Returns are โHigherโ than the Peers | Result II: Your Fundโs Returns are โLowerโ than the Peers |
| Interpretation | If your fundโs returns are higher than most similar funds, it shows that the fund manager is making strong investment choices and delivering better-than-market results. | If the fundโs returns are lower than its peers, it indicates that the fund is underperforming compared to peers. |
| Your Potential Action | Your fund is performing โabove averageโ, and you may continue investing in the scheme. | You might want to monitor it more closely or consider switching to a better-performing fund. |
4. Check How Diversified Your Mutual Fund Investment Plan Is
A diversified fund spreads its investments across:
Different sectors (like banking, technology, and healthcare)
and
Asset types (like stocks, debentures, and cash instruments).
Such a mixing reduces the impact of a poor performance in any single sector or asset. For example,
Say the technology sector falls sharply.
Now, gains in banking or healthcare holdings can offset some of these losses.
This keeps the overall portfolio relatively stable.
Similarly, several fund managers combine stocks with bonds to reduce mutual fund risk, as bonds are generally less volatile than stocks.
How to Apply This Review Technique?
While reviewing your fundโs strength, check for these three major parameters:
| Parameter | What Should You Look For? | Why is it Important? |
| Asset Allocation |
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| Sector Exposure |
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| Quality of Holdings |
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5. Understand Risk-Adjusted Returns
When reviewing mutual funds, donโt focus only on how much return they have given. Itโs equally important to see how much risk was taken to achieve those returns. For example,
Now, even though both gave a 10% return, Fund B took more risk to achieve it. If the market drops, Fund Bโs NAV could fall much more than Fund Aโs. This is why looking at risk-adjusted returns is important.
How to Apply This Review Technique?
To understand the relation between risk and reward, you may refer to these three risk-adjusted metrics:
| A) Standard Deviation | B) Beta | C) Sharpe Ratio |
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Conclusion
So, as an investor, you now know that mutual fund investment is not a one-time activity. You should make regular periodic reviews to check whether your mutual fund investment plans are serving your financial goals, risk tolerance, and market conditions.
To make a thorough review, you can follow these techniques:
Check if the fundโs returns outperform its benchmark over 1, 3, 5 years and since inception.
See whether the fundโs costs (expense ratio) are reasonable compared to similar funds.
Study past performance and look for managerial consistency.
Evaluate asset allocation, sector exposure, and quality of holdings.
Look at standard deviation, beta, and Sharpe ratio to assess risk versus return.
Disclaimers
An Investor Education and Awareness Initiative by Tata Mutual Fund.
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This communication is a part of the investor education and awareness initiative of Tata Mutual Fund.
Mutual funds can seem overwhelming if you are new to investing, but they can generally be divided into two categories: active funds and passive funds. Both active and passive funds have their own unique benefits and can complement each other in a well-rounded portfolio. Active funds tend to be more popular. However, passive funds may also offer an alternative for building wealth.
In this blog, weโll dive into the world of passive funds, exploring what they are and why they might be worth considering.
Passive funds are mutual funds that follow a market index, like the Sensex or Nifty. These funds invest in the same stocks and in the same proportions as the indices they track.
The big difference with passive funds is that the fund manager doesnโt have to pick and choose which stocks to invest in. Instead, they simply copy / replicate an index. For example, if a passive fund is tracking the Nifty 50 index, it will invest in the stocks of the 50 companies that make up that index in the same proportion.
Passive funds come with several benefits that make them appealing to investors. Letโs break them down:
Whether you decide to invest in active or passive funds depends on your financial goals, risk appetite, and investment timeline. If youโre new to investing and feel overwhelmed, consider passive funds as a simpler, lower-risk option. You may consider consulting a mutual fund distributor to find the right fit for you.
Disclaimers:
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Do you prefer a simple approach to investing? If yes, passive mutual funds are good to explore. These funds replicate an index or follows an index composition and hence try to mirror the index returns. That is why they are called passive funds. These are simple to understand and do not need constant supervision like an active fund.
In this blog, weโll go over a checklist to help you get the most out of your passive investments.
When investing in passive mutual funds, it's important to think about your goals, risk tolerance, and how long you want to invest. Here are some strategies that may effectively help you enhance your investment outcomes:
Before you invest, decide what youโre saving for. Are you planning for retirement, growing your wealth, or saving for your child's education? Clear goals will help you determine your time period and the risk you could take respective to that goal money. This will help you choose the relevant passive fund.
Diversification means spreading your investments across different asset types, sectors, and market caps. Passive mutual funds could help you do this. Depending on your investment objective you could choose the respective index based passive fund. By diversifying, you manage and optimise the risk and increase the potential for your portfolio performance.
Understanding your risk tolerance is crucial. Some passive funds, depending on the index composition, may provide moderate returns, while others might be more volatile. Select funds that align with your comfort level and ensure they do not jeopardize your financial goals
Passive investing is effective over a long period. Stick to your plan and avoid reacting to short-term market changes. Keeping a long-term mindset will help you ride out market ups and downs.
Check your investments regularly to ensure they still align with your goals and risk tolerance. If needed, rebalance your portfolio to maintain the right mix of assets and risk. This could help optimize your returns.
Passive mutual funds are becoming increasingly popular in India. They let you benefit from market growth without the need for constantly monitoring the market, by simply following the respective index with an aim to mirror the performance of a benchmark index. To make better investment choices, it's important to understand the structure of different types of passive fundsโlike index funds, ETFs, and fund of fund.
By setting clear goals, diversifying your portfolio, knowing your risk tolerance, and keeping a long-term perspective, you could build a passive investment strategy that helps you achieve your financial goals.
Disclaimers:
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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