What Is an Investment Portfolio Analysis?

An investment portfolio is an important asset for your financial well-being. Controlling your portfolio, keeping it healthy and up-to-date will help your nest egg to grow so you can afford that great retirement, vacation home, or college tuition for your children. A good way to make sure your portfolio is heading the best direction is with a professional portfolio analysis.

So what is a portfolio anyway? Your financial portfolio is all of your investments together. A good portfolio will usually consist of a mix of stocks, bonds, precious metals like gold, real estate, and/or bank accounts. It is the total value of all that you are worth, financially.

An investment portfolio analysis will take a look at the health of your investments to make sure your money is working for you. Most financial portfolio analysis reports consist of two parts; a risk aversion assessment and a return analysis. For very simple portfolios without a whole lot of money or investments, there are several computer programs that can help to analyze your portfolio’s return rates; however, these programs are not always as accurate or complete as a human analysis. Also, most programs do have an accurate risk aversion assessment.

The risk aversion takes a look at how “risky” your portfolio is. The younger a person is when they start their portfolio, the more risk should be applied to that portfolio. The closer to retirement the investor gets, however, more and more of their investments should be applied to “safe” investments, such as bonds. The safe investments do not have the potential to grow as much, but will grow more steadily then the high-risk investments could.

The risk aversion will also take into account the amount of risk a client is willing to have to their portfolio. If your risk aversion is high, for example, you will choose to move most of your money into safer bonds. Risk aversion is different for everyone.

The second part of the assessment is to analyze your returns. This report will give the investor a good idea of how their portfolio is doing, where it is going, and how long it will take to mature. Some specialists will also study your portfolio to find out the recovery period from a bad market of the current portfolio, which also gives insight into the quality of the portfolio.

It is possible for a lot to change in the market on a daily basis, so it is important to keep track of your investments and your portfolio. Do not let your portfolio fall into disrepair; make sure to run an analysis on your investment periodically to make sure all of your stocks, bonds, and other investments are still sound.

Once the analysis is complete, an investor will have a good idea of which of your investments are sound, which are good, and which need to be changed. This will help the investor to make smart choices now, and avoid costly mistakes in the future. Although your portfolio may appear sound, it may need a few tweaks to be making you the most money it can make.

Leave a Reply

Your email address will not be published. Required fields are marked *