Churning is bad for our money box because if we do not give our investments time to grow, we end up with low returns or, worse, losing money. That doesn’t mean we shouldn’t review portfolios. Many financial advisers and distributors insist on an annual review and meeting the clients two-three times a year (on phone) to keep abreast of what’s going on with you and your money. You don’t need to look at your portfolio regularly, but here is why you should review it periodically.
Review of goals
At the start of a financial plan, you typically list out the goals to say why do you want to invest your money. Usually, you list out goals such as retirement, kids’ education, and buying a house or a car.
Based on these answers, your adviser and you get down to decide your monthly investments—hopefully through a systematic investment plan (SIP). A periodic review helps you to ensure that you are on track with your investments and goals. Over time, it’s good to know how far, or near, you are away from your goal. Periodic reviews also help in checking your asset allocation; for instance, if you are too near the goal, your adviser may suggest shifting to less volatile funds like a low-risk debt funds. Adding goals also call for a review, as you would then either allocate more money every month or cut back on your spending habits or perhaps even trim your SIPs that you had earmarked for other goals.
