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6 Aspects of an Effective Investment Portfolio Check-Up

Aug 2, 2022 10:00:00 AM

Health analysis on paper

Whatever you choose to invest in, regularly assessing and adjusting your portfolio is key to financial success. This is true of long-term investors, too: sometimes you’ve got to shake things up to stay on the right track. Whether economic conditions, new wealth ambitions, or a simple change of strategy have you reconsidering your portfolio, these are the aspects that really matter.

Remember: your portfolio is due for a check-up at least once a year!

6 Key Points to Consider in an Investment Portfolio Reevaluation

1. Review Your Tracked Investment Performance

Your portfolio is impossible to evaluate if you don’t know how well it’s performed. If you’re invested in the stock market or many other typical investments, here’s some fair warning: the likelihood of your portfolio looking like a dumpster fire is higher than normal. If you’re seeing red, though, don’t immediately jump ship.

Just because an investment isn’t performing well right now doesn’t mean it won’t get better. Chart its performance from the beginning until now and look at how it has changed and under what circumstances. You may not need to drop an investment entirely, but rather reallocate assets to better serve you throughout this inflationary period.

2. Consider Your Risk Allocation
Your taste for risk can change over time. Similarly, economic circumstances can increase the volatility of certain investments, pushing them beyond your comfort zone. You can do this for individual investments but also by category.

It may be as simple as needing to diversify. Remember, diversification lowers risk. If you have your eyes set on some riskier investments in the near future, go ahead and establish some lower-risk alternatives to add to your portfolio mix.

3. Identify What's Eating at Your Profit Margins

They say you’ve got to spend money to make money, and that’s not wrong. But there’s a difference between putting up an initial or ongoing investment contribution and bleeding profits. You may be subjected to various investment fees, depending on your strategy: entry and exit loads, brokerage and advisory fees, and transaction fees. They might be marginal percentages, but the larger your portfolio grows, the more they cost.

If investing in real estate, you’ve got to know what sort of extra expenses you’re incurring each month and what ongoing costs you cover for your property.

4. Compare Your Portfolio to Industry Benchmarks

How do you know whether you’re doing well? There are two ways to approach this: breaking down your investments by category and comparing them to the performance of other assets in that same category and evaluating your portfolio performance and returns. Look at comparable indexes or assets, talk to other investors, and get a feel for how in line your portfolio is with the average.

If you’ve been underperforming, adjustments are needed. If you’re in line with averages or are over-performing, you’re on the right track!

5. Revisit Your Goals

One misconception about long-term or buy-and-hold investing is that you’re 100% married to your portfolio. The truth is your portfolio will change over time. You’ll execute exit strategies, acquire new assets, find a niche, and diversify.

Your financial goals as a 30-year-old with a fledgling career will be vastly different from the 64-year-old on the brink of retirement. As you age, recognize your changing financial priorities. It may be more important to you to fund a child’s education, pay off a mortgage, or establish enough cash flow to support your dream retirement.

You can have a portfolio that looks great on paper, but if it doesn’t serve your current and overarching financial goals, something’s got to change!

Gif of rotating faces on same body6. Factor In Your Unique Circumstances

While industry and peer comparisons can be helpful for evaluating portfolio performance, you must take your unique context into account. You may not have the same resources, experiences, or avenues to succeed in the same way as the next guy. The pandemic may have taken a harder toll on your business, your financial priorities may be vastly different, and you almost definitely have different financial circumstances.

These matter. The best investment for you – the best portfolio allocation, the best risk level, the best diversification strategy – isn’t going to look like everyone else’s. Be sure your portfolio lines up and changes with your capacity, risk tolerance, and goals.

Don’t just endure a fluctuating and uncertain investment market – adapt and overcome.


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