PARAMETERS FOR ELIMINATING YOUR MUTUAL FUNDS
1. Begin by aligning your mutual funds with the role they will play in meeting your financial goals.
2. For this, your portfolio should not contain more than 8 mutual funds at any time.
3. Review your mutual funds for their contribution to your financial goals and eliminate those that are no longer relevant.
4. Thereafter, compare your remaining mutual funds with those having a similar portfolio objective and fund management style.
5. Exit the funds that have been performing poorly consistently, while giving some more time to an above-average performer in the past.
6. Keep a close watch on these funds over 3-4 quarters, and exit if the fund continues to underperform its peers even after this period.
7. Those funds which were included in anticipation of benefitting from a particular situation should be monitored more closely, and exited if the expected situation did not materialize or the objective was achieved.
8. Also, exit those funds that show inconsistency in their objectives, like declared benchmarks and allocation to assets, if they are not appropriate for you.
9. Once you follow the above-mentioned elimination process, you will have a portfolio of well-managed funds geared to your investment expectations.
10. Be disciplined in reviewing your investments and exit when required.