Regularly reviewing your investment portfolio is a useful way to ensure that all elements of your portfolio are aligned with your investment goals. Some investors may analyze their portfolios on a quarterly basis, depending on their investment horizon, while others do so annually. A portfolio review examines your various asset allocations individually and rebalances those that no longer fit your investment profile.
Here are the basic steps to analyze your investment portfolio:
- Re-examine your investment goals – When analyzing your portfolio, first and foremost check your investment goals and whether a goal has changed due to personal circumstances.
- Rethink your portfolio allocations – For example, if you find that your short-term needs have changed and you need more liquidity, you can reconsider your portfolio allocations to better suit your needs.
- Check your risk profile – It is important to review your risk profile each time you analyze your portfolio. Macroeconomic factors can affect the risk of your holdings. Accordingly, you can decide whether to reduce your corpus’ exposure to riskier securities to more stable ones, or vice versa.
- Compare portfolio performance against benchmarks – This is one of the most important steps in analyzing your portfolio performance: compare your portfolio’s returns to those of the benchmark to see if you have outperformed or not. In the event of underperformance, you can evaluate your holdings and see which allocation should be higher or lower for better returns.
- Reevaluate the various fees and costs associated with holding your portfolio – If you don’t manage your portfolio yourself and instead have hired professionals to do it, double check to see if fees and brokerage fees are low or have increased over time. Even investing in mutual funds (MFs) and exchange-traded funds (ETFs) come with management fees that can eat away at your returns over time.
- Rebalance the portfolio as needed – After studying each of the above parameters, you need to decide whether or not to rebalance your portfolio. If you need more liquidity, you can convert part of your investments into cash or gold, giving you more liquidity. If you feel that your risk appetite has diminished over time, consider reallocating more of your portfolio to safer investments, such as high-quality bonds or ETFs that track indices. Alternatively, if you realize you need steady income, you can reallocate a portion of your stock investments into dividend stocks to ensure consistent inflows.
How to do a portfolio analysis using TipRanks
First, make sure you have uploaded your portfolio to TipRanks Smart Portfolio. Once you’re logged in, you’ll see your portfolio summary at a glance, with daily returns, 30-day returns, and total returns. You can also see the top gainers and losers from your portfolio, as well as the market overview. In addition, you’ll see the list of all your shares with price changes, holding value, holding gain or loss, and number of shares held, along with several of TipRanks’ unique tools.
Additionally, TipRank’s Smart Portfolio allows you to add cryptocurrencies, MFs and ETFs, as well as trade fractional stocks. You can click on any security from your inventory list to research it further.
Let’s look at a sample portfolio on TipRanks below to see how the Smart Portfolio works and help you analyze your portfolio. The steps required to analyze a portfolio as listed above are in bold.
as soon as you have Review your investment goals And reconsider your risk profileyou can look at yours portfolio allocations on TipRank’s Smart Portfolio to check if they still match your current risk-reward appetite.
After reviewing the overview, you can go to the Analysis section, which shows you your portfolio’s asset allocation and stock distribution based on sector, market cap, dividend, beta, and price/earnings per share (P/E) ratios. Here you can carefully consider whether your portfolio is diversified well enough to align with your current investment goals. For example, the portfolio below has zero exposure to cash and liquid ETFs, while having higher exposure to cryptocurrencies, making it very risky given the current macro backdrop. You may want to reconsider this allocation and allocate higher proportions to safer, liquid assets.
You can also use the TipRanks Smart Portfolio tool to examine the portfolio volatility (beta) versus the average volatility of portfolios created on the TipRanks platform. Also, you can analyze the P/E of your portfolio compared to the average P/E of the portfolios created on the TipRanks platform. You can also see your dividends and stock alerts (if any).
Next, you can assess the current performance of your portfolio. This includes seeing your own success rate of profitable transactions and average return per transaction. You can also Compare your portfolio returns to benchmark returnslike those of the S&P 500 Index (SPX) or the Nasdaq 100 Index (NDX).
As mentioned, this is one of the most important tasks during portfolio analysis as it helps you understand whether your investments are generating enough returns or not. In addition, you can see recent activity on each security and the returns it has made to date. This step will help you understand which of your allocations are underperforming and make appropriate rebalancing decisions.
After that, you can examine your overall asset allocation in comparison to average portfolios created on TipRanks. This will help you understand other investors’ current bias towards sectors and may inspire you to think along the same lines. You can also see your dividend yield, beta, and P/E ratio and compare them to average TipRanks portfolios.
After studying your portfolio thoroughly with the help of TipRank’s Smart Portfolio, you come to the most important part Rebalance your portfolio. You can do this yourself on TipRanks by selling/buying and reallocating portions of your portfolio to better align with your current investment goals. You also need to review the fees and costs associated with holding your portfolio and decide whether it makes sense to continue investing in a particular asset class.
Finally, you can even read news articles relevant to your portfolio and browse the calendars to see if any of your stocks have earnings releases or dividend payments coming up soon.
Key Takeaways – Importance of Portfolio Analysis
A regular study of your portfolio will help you to realign your investment goals with the holdings. You can also ensure that not all asset classes are vulnerable to similar macro factors and make your portfolio resilient by uncorrelating assets.
Similarly, you can learn how to best diversify your portfolio to realign it with your risk-reward appetite and achieve maximum returns. Additionally, you can analyze your portfolio returns against a benchmark and see whether or not the extra risk taken is worth the returns. After you have a thorough understanding of your portfolio, you can decide to rebalance some parts of your investments to meet your current investment goals.
If you haven’t already built your portfolio on one of the better portfolio analysis platforms, try the TipRanks Smart Portfolio today and see how it can help you manage and analyze your portfolio effectively.
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