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Time To Have Your Portfolio Reviewed?

Most investors give only a short glance to their monthly holdings statements. A quick comparison of the summary valuation with the previous month’s statement indicates whether we are in the plus or minus. This gives us a comfortable sense of having our hands on the wheel and our eyes on the road. 

But this is a false assurance. In reality, this comparison only gives us only a limited idea of things. Short-term and cursory comparison tend to create panic in falling markets and false hopes and jubilation in rising ones. Sudden or significant ups and downs make us forget about our personal level of affordable risk and only react passionately to rising and falling returns. Such emotional reactions can derail us from our long term goals and financial discipline. They can cost us in terms of lost opportunities or even substantial losses. Research shows that individual investors tend to underperform the market because of poor timing, often selling in sliding markets and sitting out rising ones.

To avoid such expensive consequences, be alert to changing circumstances and make necessary adjustments, that too at the right time. Routine monitoring and rebalancing of investments will help you remain calm and objective through peaks and valleys while also making your long-term investing journey more profitable and enjoyable.

Some important factors to consider whilst evaluating a need for a fresh investment strategy or portfolio mix are:

1. Change In Your Circumstances:

Changes in your individual risk-taking abilities or time horizons for any personal reasons such as unexpected promotions, bonuses, fresh opportunities, illness, accidents, etc… may require a reallocation of your assets.

2. Changes in Individual Stocks:

A particular fund or stock may require to be weeded out.

3. Industry-wide Changes:

Diversifying and rebalancing your holdings across different industries may be required due to industry-specific market changes.

4. Market Changes:

Redistribution of your investment across various asset classes such as equity, debt, real estate, etc. may be in order due to shifting market trends.

5. Overlap due to Mutual Fund Changes:

As Mutual Funds rebalance their own portfolios on a routine basis, occasionally your exposure to the same stocks may change by default. Adjustments may have to be made to correct such overlap.

6. Taxation Changes:

Keep an eye out for the impact of any modifications in tax laws.

In order to be attentive to all such influential factors, an annual review of your portfolio is a must.  But depending on your risk level, time horizon, investment goals and available expertise, a more frequent evaluation such as monthly or quarterly may be required.

If you would like our help in going over your portfolio, cleaning it up and setting up a suitable monitoring routine.

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