Mostly, there are two sets of investors. One who forgets their portfolio till someone asks them to review it and the other who always cling to their portfolio and keep wondering whether funds need changes.
What should be the right strategy?
The right thing is to do it in such a way that you can monitor the dynamic situations like-
1) The nature of your financial goals.
2) Your changing risk profile.
Or, external factors such as-
1) Whether funds are performing consistently.
2) Whether the fund management team is sticking to the basics.
3) Macro Economic factors affecting the market dynamics.
These factors need monitoring but not very often. Frequent churning of the portfolio is counterproductive. You end up replacing the funds based on recent performance which is one of the worst ways of investments. Also, this approach squeezes out some wealth in the form of taxation and exit loads.
But not reviewing it is also not conducive either. You may lose out by not taking corrective action based on ever dynamic internal and external factors. Also, by ignoring your portfolio, you may not be able to save enough to achieve your financial goals. So even if you have generated handsome returns on your existing portfolio, you would be far off from your financial goals.
So, what should be the ideal frequency?
For majority of the investors in majority of the situations, review of financial plan and portfolio, once in a year is good enough. There could be few exceptional situations, which demand more frequent attention. But even in most of those situations, the desired action is to maintain the status quo.
Manoj Pandey
CFP
