Here’s how Portfolio Diagnostic Report can help
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01 FEBRUARY, 2021

While investing in Mutual Funds may be relatively passive as compared to investing in equities, the "invest and forget" strategy does not truly work either. Investors should regularly review their portfolio and re-balance their portfolio based on the factors like market conditions and investment goals, which may change with time.

Why should an investor review his/her portfolio?

Several reasons make regular reviewing a must for every successful Mutual Fund investor. Some of the most important ones are-

  • Tracking peer performance
  • Maintaining optimum diversification
  • Eliminating underperformers
  • Preventing portfolio overlap
  • Identifying and rationalising high-risk investments
  • Checking the quality of your portfolio

Portfolio Diagnostic Tool from Kotak Mahindra Bank

For an investor new to Mutual Fund investments, a lot of what is mentioned above might not make a lot of sense. But no matter if the investor is new or a professional with years of experience, a regular portfolio review is a must for everyone.

To make things easier for the investors, Kotak Mahindra Bank has launched an innovative Portfolio Diagnostic Tool (PDT). The one-stop Mutual Fund Portfolio Reviewing Tool allows investors Relationship Manager to enter the name of every Mutual Fund that he/she holds (including the ones that were not distributed by Kotak), along with the total allocation/market value.

Based on these details, the tool can generate a detailed analysis of all the different holdings of investors overall portfolio. The generated report can then be used by the investors to analyse their Mutual Fund investments thoroughly, track performance, and even make changes if required.

Different ways in which the PDT from Kotak Mahindra Bank can help

The Portfolio Diagnostic Tool can be used in many ways. Some of the most important ones are;

  • Track allocation percentage of all the funds: The tool helps investors get a comprehensive report of all of their holdings and identify the current allocation portion of each of the fund they hold. This can help investors optimise portfolio performance by altering their investment strategy based on market performance and other key parameters.
  • Know asset allocation: To build a well-diversified portfolio, it is essential to have a balanced equity-debt ratio as per investment objectives and risk profile. Further, it is important to create a dynamic portfolio that is invested across various market-cap funds and is in line with the investment objectives and risk profile. The tool can give investors a glance at the equity and debt allocation of their portfolio along with the market-cap break-up of the portfolio.
  • Credit quality of the portfolio: It is not just about the asset allocation but investors also need to keep an eye on the portfolio quality of the underlying debt instruments of the fund they hold. The tool also gives investors a quick peek into the break-up of the portfolio based on the credit quality of the funds.
  • Match the sectoral allocation of portfolio with benchmark: The tool helps investors identify the sectoral exposure of their portfolio and also gives a detailed break-up of how the allocation in each sector compares to Nifty 50 index*.
  • Identify performance consistency of the holdings: Through its unique Quartile Analysis representation one can identify whether the fund is within the top 25% performers as Quartile 1, within next 25% performers as Quartile 2, within the next 25% performers as Quartile 3 or within the rest 25% performers as Quartile 4. The Quartile analysis of a fund is with its peer group. Top 2 quartile performers are considered as outperformers. The Quartile analysis looks at the last 4 calendar years’ quartile positioning. Thus, if the fund has been amongst Quartile 1 or Quartile 2 performers, consistently, then one may consider the Mutual Fund as a consistent performer and continue with the investment. However, if the fund has slipped from Quartile 1 or 2 position to Quartile 3 or 4 position and continues to be amongst the bottom 2 quartile performers then, one may consider such investment as an underperforming investment in his/her portfolio and may look to re-allocate the money in some other performing equity fund basis his/her investment horizon and risk profile.
  • Know the Risk-Reward Ratio of your portfolio: Investments can be broadly classified into four quadrants; High Risk-Low Return, High Risk-High Return, Low Risk-Low Return and Low Risk-High Return. Needless to say, the most desired quadrant is Low Risk-High Return. Through an interactive bubble chart the tool gives a good view of the risk-reward behaviour of each fund in investor’s portfolio. He/She may take necessary action to come out of those funds which demonstrates High Risk-Low Return.

While these are some of the important uses of the tool, the tool can help an investor in many other ways as well such as:

  • Give a break-up of Debt Investments as per their maturity bucket
  • Identify the top 10 companies according to their portfolio allocation
  • Know the sector-wise portfolio concentration

From optimising returns from your Mutual Fund investments to ensuring that your portfolio is always in line with your risk appetite and investment objectives, the PDT from Kotak Mahindra Bank is one simple solution to become a smarter investor.

Investor can get in touch with their Relationship Manager to know more about using this diagnostic tool and how to use the generated report for rebalancing the portfolio if required.

*Sectoral exposure of Nifty 50 index is represented from the portfolio of Kotak Nifty ETF.

Mutual funds are subject to market risks, read all scheme related documents carefully.
Kotak Mahindra Bank Ltd., AMFI registered Mutual Fund distributor. AMFI Registration Number (ARN) 1390.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.