Home/Blogs/Cleaning your house this Diwali? Brush up your portfolio too - 5 quality checks every portfolio should have in place.

Cleaning your house this Diwali? Brush up your portfolio too - 5 quality checks every portfolio should have in place.

Published Date: 26 Oct 2020Updated Date: 05 Jan 20236 mins readBy MOFSL
Brush up your portfolio this Diwali

Diwali, the festival of lights, is fast approaching. It is customary for many Indian households to have a cleaning and redecoration session right before the festival. On a similar note, you, as a stock market investor, could also make use of this time to check your investment portfolio and make the necessary clean-ups. Here is a brief portfolio quality checklist that can help you objectively assess and analyse the performance of your investments.

1. Take a look at your asset allocation       

The first investment portfolio check that you should ideally make is an assessment of your asset allocation. Depending on the investment strategy that you employed, your asset allocation might contain a mix of different financial securities ranging from shares to bonds. 

Since there would have been a change in the price movement of these securities over the past year, the asset mix of your portfolio is also likely to have changed. And so, it is important to assess the level of change in your investment portfolio’s asset mix and take corrective measures, if any. This way, you can make sure that your investment strategy is in line with your financial goals. 

2. Examine your holdings individually 

Once you’ve done a broad examination, the next in line on the portfolio quality checklist is an in-depth examination of your portfolio holdings. Considering the fact that around two quarters of the year have already gone by, Diwali is the perfect time to do a mid-year check-up of your holdings.

A good way to go about the individual analysis is to pull up each of the investment options from your portfolio one after the other and do a comprehensive scrutiny. Some of the areas that you should focus on include the fundamentals and valuations of stocks, the credit ratings of bonds, and stock analyst opinions.    

3. Do an overall performance review of your investment portfolio   

After a thorough individual examination, the next logical step is to conduct a performance review of your entire stock market investment portfolio. The ideal way to assess the performance would be to compare the current metrics with those of the previous year. 

While you’re at it, here’s a point that you should note. Since the stock market is an unpredictable environment, it is quite normal for your portfolio to not have performed according to your expectations. But if you start to notice a pattern or if you see that the performance has been languishing for far too long, it might be time for you to take corrective measures.   

4. Assess the future potential of your portfolio 

Once you’re satisfied with the current performance metrics of individual stocks and your overall portfolio, the future growth potential is what you should focus on next. You could make use of the current economic scenario, industry-wise data, and analyst reports and opinions to get a fair idea of what the performance of your investment portfolio would be like in the near future. 

If the future potential of your portfolio turns out to be high, that’s well and good. If not, then you might have to switch it up to align it according to your goals and the current market scenario.     

5. Evaluate the liquidity position of your investments 

When it comes to stock market investments, liquidity is of utmost importance. And so, the final item on your portfolio quality checklist should be an objective assessment of the liquidity of your investments. 

If you find that your investment portfolio consists of a majority of illiquid and long-term options, your ability to tap into your investments for funds during emergencies and contingencies would invariably be low. In such a situation, the ideal move would be to increase the amount of liquid and short-term investments to level the playing field.

Conclusion

With these checks in place, you can rest assured that your investment portfolio is neat and shiny, just like your home this Diwali.

 

You may also like…

Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C
Click here to see your activities