Building a decent investment portfolio alone is not enough, as you must review and monitor it regularly. Why? Because if left unchecked, your portfolio can easily deviate from your investment objectives. After all, you are investing for specific financial goals, and so you must check whether your investment is performing as well as you want. Besides, it helps you align your portfolio to take advantage of the market movements.
Thus, performing a portfolio review at regular intervals can help you maintain and adjust it according to your investment goals to gain desired results. Keep reading to learn how to review your investment portfolio.
How to review your investment portfolio
To examine your investment portfolio, you must evaluate multiple factors such as:
While it may seem basic, but it’s perhaps the most crucial element that you must evaluate. Since circumstances change, so can your investment goals from one year to the next. For instance, if you lose your job, you might have to supplement the lost income by keeping the long-term goals aside. Hence, re-evaluating your goals and making the necessary changes is a critical step in reviewing your portfolio.
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The ratio of stocks and bonds in your portfolio is termed as asset allocation. It is an essential part of your long-term investment strategy. And the proper asset allocation varies for every investor based on your goals, time horizon and risk tolerance. If you are not sure about your asset allocation, a financial advisor can give you valuable perspective on making necessary adjustments to your portfolio to meet your goals.
Level of diversification
Even if you have proper asset allocation, diversification of stocks is essential to your portfolio. Don’t be eager to jump on popular names when they do well in the market, as stocks don’t always stay up. Make sure your portfolio is broadly diversified with different asset classes to improve long-term performance and mitigate risks.
Did you know that the effective tax management of your investment portfolio can improve your returns? Review the tax implications of your investments at the end of the year and check if you had any gains or losses.
Lastly, evaluate the different fees, including management, administrative or account fees you are paying for the services to ensure your investments have low operating expense ratios.
Additional Read: Are Your Investment Actions Healthy or Toxic for You?
When should you review your investment portfolio?
Although investment portfolio review is usually conducted annually, there is no set rule as to when and how often you should do it. You can review your portfolio at the end of the financial year before filing your taxes or twice a year to prevent the value from becoming too volatile. However, don’t review too frequently as it can lead to irrational investment decisions.
Having a good grasp of your investments can help you feel more confident as an investor and maintain an optimal asset allocation mix. Plus, you can verify the investments according to your changing life goals and expectations.
Finally, if you are starting your investment journey, download the Moneyfy app by Tata Capital to compare different mutual funds and make better investment decisions!