The importance of investing right is well known. You have to find an investment opportunity that has potential for the future and matches your investment goals for the best results. This is often a chore, but investors do it because it is important.
But often, many investors miss out on analysing their portfolios on a timely basis. Stock markets change with time. What is beneficial today may not be tomorrow. Hence, it is imperative that you check on your portfolio every once in a while, to ensure the portfolio is still benefiting your goals. Investment portfolio analysis is something that can help you here. Let us learn more about the portfolio analysis and see how you can do it.
What is portfolio analysis?
As discussed above, every investment should have a goal. This goal helps defines how your portfolio should ideally perform. For instance, if your goal is to appreciate your funds aggressive, the risk will be higher and regular dips here and there are unavoidable at times of market uncertainty. At the same time, if these regular dips happen for a more conservative option, it may be concerning. Portfolio analysis helps you understand exactly this – to see whether your investments options are performing according to your plan.
But why would the portfolio change its character? This can happen due to natural changes that the stock market goes through.
For instance, if you want aggressive growth, you may invest in SIP or in a sector that is seeing aggressive growth at the moment. A few months from now, that could change. That certain sector may not display the same growth now. Then, you will need to back to the drawing board and figure out where else to park your money. In simple terms, this is portfolio analysis. As we see in the example, it helps you ensure you, as an investor, always get the best out of the market.
How to do portfolio analysis?
If your portfolio is due for an analysis, below are the step-by-step instructions on how you can do the same.
Step 1 – Asses the current situation
The first step is similar to the example we have seen above. Here, you need to assess your portfolio according to the current situation. A lot can change from the time you invest to the time you do the portfolio analysis. For instance, the market could be in a different trend. It could have been in an uptrend then, and according to your financial planning and risk appetite, you may have chosen to invest in certain securities. Now, if the market is in an uptrend, the same situation might have changed.
Step 2 – Reinvest investment goals
Not only the stock market but your investment goals can also change. It is imperative to understand the same and make changes to your portfolio. For instance, your income might have increased from the last time you checked your portfolio. This could mean that you are able to take more investment risks. Thus, your goals change, and your portfolio should also change.
Step 3- Rebalance your portfolio
A perfect balance is something all portfolios deserve. It can ensure that your capital is appreciated while there is enough protection for the same as well. You may have balanced your portfolio while investing, but the situation may have changed. Hence, ensure you rebalance every time you do a portfolio analysis.
Step 4 – Take expert advice
An expert’s advice will never go out of style when it comes to investment. Hence ensure you talk to one if there is a need.
Experts suggest you analyse your portfolio every quarter to take the best advantage of your invested money. The above pointers will help you do the same.