76 DALAL STREET INVESTMENT JOURNAL I JULY 8 - 21, 2019 DSIJ. in^
Special Report
MF page - 10
Sectoral exposure - While doing your annual portfolio
review, it is important to check for sector exposure. If your
portfolio has tilted towards any particular sector, you should
bring it back to the required level by trimming your exposure
to the fund due to which you have increased exposure to the
sector. Or you can also wait for your fund manager to reduce
the weightage. Nevertheless, at the fund level, it may happen
that exposure to a sector is within control. However, at your
portfolio level, it may happen that you are more exposed to a
particular sector.
Hence, the responsibility is on you to take appropriate action to
bring back your sectoral limit to required level. Concentrating
on one or two sectors of the market might pump up your
returns temporarily, but it will also leave you dangerously
exposed to downturns in those sectors.
Exposure to individual companies - You check your
portfolio and chances are high that in most of the funds you
will find HDFC Bank and Reliance Industries. You need to
check the exposure to these stocks in your overall portfolio.
This will help you to determine if unintentionally you have
invested in the stock that have generated best returns last year
and now forms 15% or more of your total portfolio, which
could slide from here. Hence, weed out or scale back those
funds that are heavy on such stocks so that your portfolio canreach a safer limit.
Rebalancing
The annual review should ideally culminate in rebalancing of
your portfolio. Some of the concepts of rebalancing may seem
to be counterintuitive for most of us as they may warrant you
to sell some of your best performing funds. Nonetheless, youshould always follow that cardinal rule of investing, that is,
selling high and buying low. Moreover, if you continue with thesame portfolio, it may entail risk.
The reason why you should stick to the asset mix you had
decided originally is because it will help you to meet your
goals. If you do not hold the right portfolio mix anymore, it
makes sense to restore the mix. While doing rebalancing, keepa check on the expenses, such as exit load and taxes.
It makes much sense to set aside time for regular portfolio
reviews throughout the year to ensure that your portfolio is on
the right track. Even if nothing has changed about yourinvestments, it is still important to make sure that your
portfolio's asset allocation is where you need it to be. DS