Last reviewed and updated on October 17, 2023 by Gabe Ross
Performing a periodic review of your investment portfolio is a useful method of ensuring that the elements of your portfolio are aligned with your investment goals. Some investors may analyze their portfolios quarterly, while some might do so annually. A portfolio review involves studying your different asset allocations and rebalancing those that no longer suit your investment profile.
Here are the basic steps to follow to analyze your investment portfolio:
- Re-examine your investment goals – When analyzing your portfolio, first and foremost, revisit your investment goals and see if any goal has changed due to your personal circumstances.
- Reconsider your portfolio allocations – For example, if you realize that your short-term needs have changed and you need higher liquidity, you can reconfigure your portfolio allocations to better suit your needs.
- Review your risk profile – It is important to review your risk profile each time you analyze your portfolio. Macroeconomic factors can affect the riskiness of your holdings. Accordingly, you can decide if you want to reduce your exposure to risky securities and shift it to more stable ones, or vice versa.
- Check portfolio performance against other benchmarks – This is one of the most important steps in analyzing your portfolio performance: comparing your portfolio’s returns against an external benchmark, such as the S&P 500, to understand how your investments have performed. If your investments have underperformed, it might be time to re-assess your holdings to generate better returns.
- Re-evaluate the varied fees and costs associated with holding your portfolio – If you are not self-managing your portfolio and have hired professionals to do so, re-evaluate to see whether the fees and brokerage charges are low or have risen with time. Investing in mutual funds (MFs) and exchange-traded funds (ETFs) carry management fees that can erode your returns over time.
- Rebalance the portfolio if required – After studying each of the parameters above, decide whether or not to rebalance your portfolio. If you require more liquidity, you can convert some portion of your investments into cash or gold. Similarly, if you feel your risk appetite has decreased over time, you could shift a higher portion of your portfolio to safer assets such as high-quality bonds, ETFs, or index funds. Alternately, if you realize that you need regular income going forward, you can shift some of your equity investments to dividend-paying stocks, to ensure consistent inflows.
How to Perform a Portfolio Analysis with the Help of TipRanks
To begin with, ensure that you have your portfolio uploaded to TipRanks’ Smart Portfolio. Once you log in, you will see your portfolio overview including the daily return, 30-day return, and total return. You can also see the top gainers and losers from your portfolio as well as the market overview. Moreover, you will see the list of all your holdings with price changes, holding value, gains or losses, and the number of shares held, along with several of TipRanks’ unique tools.
What’s more, TipRanks Smart Portfolio allows you to add cryptocurrencies, MFs, and ETFs as well as trade in fractional shares. You can click on each security from your list of holdings to further research it.
Let’s look at a sample portfolio on TipRanks, below, for a visual of how the Smart Portfolio functions and helps you in analyzing your portfolio. The steps needed to analyze a portfolio, as listed above, are bolded.
Once you have re-examined your investment goals and reconsidered your risk profile, you can look at your portfolio allocations on TipRanks Smart Portfolio to check if they still align with 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 study whether or not your portfolio aligns with your current investment objectives. For instance, the portfolio below has zero exposure to cash and liquid ETFs, while having a higher exposure to cryptocurrencies.
Through the TipRanks Smart Portfolio tool, you can also study the portfolio volatility (beta) vis-à-vis the average volatility of portfolios created on the TipRanks platform. Plus, you can analyze your portfolio’s P/E compared to the average P/E of portfolios created on the TipRanks platform. You can also see your dividends and stock warnings (if any).
Next, you can evaluate your portfolio’s current performance. This involves seeing your own success rate of profitable transactions, and the average return earned per transaction. You can also compare your portfolio returns vis-à-vis the benchmark returns, such as those of the S&P 500 index (SPX) or the Nasdaq 100 index (NDX).
As mentioned before, 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. Additionally, you can see the recent activities on each security as well as the returns generated to date. This step will help you understand which of your allocations are underperforming, and can help understand if you want to take any rebalancing decisions.
After that, you can study your overall asset allocation vis-à-vis that of average portfolios created on TipRanks. This will help you understand other investors’ current inclination toward sectors and might urge you to think along the same lines. You can also see your dividend yield, beta, and P/E ratio and compare them to those of average TipRanks portfolios.
After studying your portfolio thoroughly with the help of TipRanks Smart Portfolio, you will can then take undertake actions rebalancing your portfolio. You can do so on TipRanks itself by selling/buying and reallocating parts of your portfolio to better align with your current investment goals. You must also revisit the fees and costs associated with holding your portfolio and decide if it makes sense to continue investing in a particular asset class.
Finally, you can even read news articles relevant to your portfolio and scan the calendars to see if any of your securities have scheduled an earnings release or dividend payments.
Key Takeaways – Importance of Portfolio Analysis
A regular study of your portfolio will help you to realign your investment goals with your holdings. You can also ensure that not all asset classes are vulnerable to similar macro factors, and make your portfolio robust by keeping the assets non-correlated.
Similarly, you can learn to diversify your portfolio to ensure that it is aligned with your risk-reward appetite. Further, you can analyze your portfolio returns vis-à-vis a benchmark and see if the additional risk taken is worth the returns or not. After gaining a thorough understanding of your portfolio, you can decide to rebalance some portions of your investments to meet your current investment goals.
If you have not yet created your portfolio, try the TipRanks Smart Portfolio today and see how it helps you to effectively manage and analyze your portfolio.
