Keeping the good.

Junking the bad.

How to do a review of your portfolio

Just as you send your car for a regular oil change and tune-up, your investment portfolio needs tweaks, alignments and in the worst case, an overhaul, for it to function at its optimum. 


First, what is an investment portfolio? At its most basic, a portfolio is a grouping of different investments, each with its own expected returns and risks. For instance, an investor may have a portfolio asset allocation of 60% stocks and 40% cash in Fixed Deposits (FD). Stocks generally would have higher potential return but with substantially higher risk. FD, on the other hand, has lower returns with lesser risk.


In the best case scenario, your portfolio’s asset allocation should reflect your investment goals. But many investors fall into buying stocks or unit trusts and simply forget to realign them to their goals as years pass. To counter that, a regular review of your portfolio is recommended.


Here are some tips to help you get started:

1. Set your review period

A quarterly (or half-yearly review at a minimum) is good. The more diligent investor may opt for a monthly review to capitalise on market movements. Whether you review it personally or seek the assistance of your Relationship Manager, log in the dates or set up reminders for them.


2. Know your net worth

Firstly, calculate your present net worth and the value of your investment portfolio. This will give an overall gauge on how well (or badly) your portfolio is performing.


3. Measure against benchmarks

How do you know if your investments are performing well? The market can be relative, but a good indicator is to check each of your investment asset classes against their comparative index. If your investment portfolio underperforms, try to figure out why. Don’t just ditch the prospectus, fund or company stock reports that are regularly sent to you as they do provide a snapshot of your investments’ health.


Another good benchmark would be to compare your individual fund or stock against similar funds or stocks in the same industry or sector. Should there be a pattern of under performance against these benchmarks, you may want to tweak your investments.


4. Map them against your established goals

How does each investment match your goals? Are you having the right mix and asset allocation? It is also possible that your goals have changed over the years, so your investment strategy will have to be aligned accordingly. For example, Investor A in his younger days may have been an aggressive investor with 70% of his investments in stocks. But now, he has plans for a family and a larger home. His risk tolerance is lower and chooses to scale down his stock allocation to 30% and invest the rest in more conservative investment vehicles.


5. Take action

The first 4 steps should provide you with a general impression of where you stand and the possible adjustments you may wish to make for your investments. At HSBC, we look to assist you in managing your total wealth. We are known for our stringent selection of unit trust funds, global insights and expertise. Just come in for a complimentary portfolio review with your Relationship Manager and we will be glad to help you to achieve your financial goals.

April 2009