5 Things to Keep in Mind When Evaluating Your Investment Portfolio

Last Updated on March 8, 2022

Once you decide to get into investing particularly with stocks, or stock-based mutual funds or ETFs, you always need to follow your investment to see whether you should hold, buy, or sell. But when should you do this? If you’re an ambitious investor who is about high risk and short-term investments for immediate profits, checking your portfolio every day is pretty much a given.

If you’re investing for the long-term such as building up your 401k or IRA, you usually won’t need to check too often. There are several scenarios where you should check your portfolio and make changes if need be.

Everyone Should Carefully Review Their Portfolio At Least Once A Year

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Usually, the best time to review your portfolio is once every year to see how companies or mutual funds whose shares you own are performing. Most investments that are made for the long-term won’t just skyrocket to unparalleled highs in one year. Usually, there’ll be steady growth that happens over several years and eventually reaches the goal you’re aiming for.

But it is good to see whether or not the companies you’re investing in are meeting their revenue goals, having management issues, or being overhauled in any way that would give you pause.

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Everyone Should Be Careful About Panic Selling During Market Changes

Right now the stock market is undergoing a lot of trouble due to the COVID-19 pandemic, and whether for better or worse, many investors have done what’s known as panic selling. The reason for this is that they start assuming they’re going to have a total loss of investment since the market is tanking and most stocks are losing value.

While this is a serious economic crisis going on in the global markets, and while there will, unfortunately, be some companies who will not survive this, investors should be very careful before they decide to dump their stocks or mutual fund holdings.

The markets have undergone some serious problems before such as the Great Depression of 1929, the tech industry fallout of 2000, and the housing market crash of 2008. In all of these cases, they recovered and consumer confidence rose up again. It’s for these reasons that you shouldn’t be too hung up on the stock market today, but consider what it will look like later in the year or a year from now.

While stocks are valued low, now could be the time to add to your current portfolio and cash in while the market looks good. While there may be stocks you do need to sell if you have the knowledge that the company won’t survive the crisis, stocks from companies with strong cash flow and solid fiscal management are stocks you should hold onto and ride out the storm with because once this COVID-19 pandemic does end, the market could be facing a huge injection of cash that could give current stockholders a huge boost. So think very carefully before you decide to panic sell any stocks.

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Everyone Should Review Their Portfolio And Goals When Approaching A Life Milestone

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Perhaps one of the biggest factors influencing investment decisions is the stage of life where the investor is. Many things happen along the way from college graduation to retirement. The following events usually have the biggest impact on investment goals:

  • Starting out at a new job
  • Getting a salary raise
  • Getting married or divorced
  • Becoming a parent
  • Children reaching college age

If you’re just getting out of college and starting out in the workforce, you might be a little more conservative in your investments if you don’t have too much disposable income to invest with. What you might do is take a job with a company that offers a good 401k plan and allow them to manage it while you get your financial house in order. But as you do earn more money and undergo life changes like marriage and having children, you might consider investing a little more aggressively and opening a brokerage account or IRA.

You might also tailor your investment goals around saving for your child’s education either through your normal investment vehicle or through a specific college savings fund. But you also have to balance future investment goals with other payments such as debt, insurance, and other current bills.

Everyone Should Review Their Portfolio Upon Coming Into A Windfall Of Money

Sometimes you’ll make an investment decision not simply based on a planned life event, but also when the unexpected happens. For example, maybe a relative passes away and bequeaths a sizable amount of their financial assets to you. Perhaps you ended up getting a larger amount than you anticipated in tax returns or even won the lottery or sweepstakes.

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Events like these can lead to new investment goals, and putting that kind of money in your brokerage account or buying into preferred dividend stock could effectively multiply it. By doing so, you not only have a windfall of money that is saved, but even a way to beat inflation which is always a risk as long as central banks print money.

Everyone Should Review Their Portfolio To Check On How Diverse It Is

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While stocks, stock options, and stock-based mutual funds are usually the most recommended investments because of their liquidity, they aren’t the only kind of investments you should consider. In fact, you’re always better off owning more investments in other funds such as bonds, high-yield savings accounts and even hard assets like real estate and precious metals.

That’s because while markets that tank usually recover, there always will be the risk of loss, and if one investment isn’t performing up to par, your other investments may make up for it. Plus as you get closer to retirement, being able to diversify and protect your wealth by moving out of volatile markets into stable ones becomes more important.

The bottom line is your portfolio only needs to be checked as often as the risks you’ve taken warrant. But it’s good to make sure that it’s on the right track throughout the course of your life.