When, Why, How Of Portfolio Review

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When, Why, How Of Portfolio Review
Analyse your investment from time to time to meet yout financial goals
Joydeep Sen - 31 May 2023

When we review our portfolio, we typically compare investment A with investment B, check their performance, and if needed, weed out the non-performing ones.

While that is relevant, what must be kept in mind is that our investment portfolio serves a bigger purpose. The review needs to be more holistic rather than an exercise where we just compare one investment with another.

Know The Purpose Of Your Investment Portfolio

The purpose of your investment portfolio is to serve your financial goals. It could be the oft-mentioned financial requirements, such as retirement corpus, purchase of assets, such as a house or car, children’s education or wedding, and so on. It could even be just one pool of savings or investment, without clear demarcation of the financial goals, which you will use to allocate to your financial requirements later in life.

The objective of investing the savings is to optimise your returns over the holding period. The operative word here is optimise, not maximise. You would be thinking, why should I not get as high returns as possible?

The answer to that is that in order to maximise your returns, you will also have to maximise the risk that you are taking, which is not advisable.

For instance, you may consider cryptocurrency to maximise returns. However, there is no fundamental basis for investment in crypto, like there is in equity stocks and bonds. It is highly risky and avoidable. Hence, you should channel your money to investments that suit your risk profile.

Optimisation also means that given your framework of risk appetite, time horizon and overall objectives, you put your money into appropriate investments. Within your framework, you may look for relatively higher returns than the sub-optimal ones.

When Should You Review The Portfolio?

There is no defined frequency to this. Under normal circumstances, you could do it on a quarterly or half-yearly basis, and review it every time a major event occurs.

In this context, people tend to think of market events as the trigger point. While events in the market are relevant for your investment portfolio, they are not as significant. Events like the ones that result in stock market index movement or gold price going up or down happen every day.

Over the long term, these things tend to even out. Cycles are the only thing constant in the market. As long as you have adequate investment horizon, you don’t need to worry about day-to-day events.

The relevant events, which should prompt you to review your portfolio, should be significant changes in your circumstances, such as landing a job, or changing your job with significant changes in terms or leaving your job and starting a venture of your own. For instance, the last situation may increase your own risk profile, and your investment portfolio needs to be de-risked to balance it out.

Marriage is another big event in your life, which usually requires changes in not only your lifestyle, but your financial planning as well. The arrival of a child in the family necessitates revisiting your financial goals and plans. As and when you approach retirement, your portfolio needs to be consolidated i.e., the risk profile of the investments has to be gradually made suitable for the decumulation phase of your life.

However, people lay more emphasis on market events such as the equity market fall in January-March 2020, or recovery thereafter, or the Reserve Bank of India (RBI) interest rate cuts during Covid-19 and rate hikes thereafter.

The fact is, these events are not in our control. What is in our control is our decisions and our portfolio. Rather than being moved by something external, we should take care of our circumstances and react accordingly.

What Should You Review In Your Portfolio?

The most important thing to consider while reviewing your portfolio is your financial goals, i.e., whether the goals themselves require any revision.

As mentioned earlier, there are certain events in life that change the way we manage our finances. Hence, a review of the financial goals themselves is something that needs to be taken note of.

Next should be a review of the progress on saving and/or investment done since the previous review, towards the financial goals. Let us say you have set a target of Rs 1 crore as your retirement corpus, besides the benefits to be given by your employer at the time of retirement. You have already started saving for it, assuming a particular rate of return. It may so happen that for a while now, your investments are giving less yield than your target return, as assumed in the excel calculations.

When you review the current market value of your investments and compare it with what it should have been at this stage, at the assumed rate of return, you realise that you may either have to save and/or invest a higher quantum towards this goal, or, you may have to change the composition of your investment portfolio.

If you don’t make the changes, you will have to remain content with the less-than-expected yield.

It is the last part that you have to be careful about. When you are thinking of investment options to increase your returns that entail taking higher risk, you will have to ensure that they suit your profile and are actually required.

It may so happen that the markets, where you have your investments, are going through a downbeat phase or a bear cycle. In that case, it is just a matter of time. You have to hold on to the investments till the next recovery cycle.

Reviewing Individual Exposures

The popular approach is to review the individual exposures in your portfolio. Research shows that your allocation of the portfolio to various asset classes i.e., equity, debt, gold, etc., is of bigger consequence. You have to take care of the broad allocation first, and review whether that requires any tweaking.

Coming to individual exposures, it could be equity stocks, bonds, mutual fund schemes, portfolio management services (PMS), alternative investment funds (AIFs), and bank deposits.

When a particular equity stock has corrected itself, either through a price correction or through a time correction, the initial reaction is to exit. The point is, price or time correction is a part of investments.

Unless there is severe deterioration in the company’s or industry’s fundamentals, the portfolio need not be shuffled after every review. Likewise, in mutual funds, a particular fund may underperform for some time. If you review quarterly, you need not exit every mutual fund scheme not doing well. Give it time, say, two or three quarters, and then take a considered decision on exit.


It is all about perspective. We tend to lay emphasis on what is more apparent, but it could be something else that carries more weight.

To give an analogy of cricket, when a fielder drops a catch, we blame that event as the cause for losing the match. However, there may be a flaw in the game strategy, batters may have played reckless shots or bowlers bowled a wrong line and length.

Similarly, in your investment portfolio, a market correction or a stock or fund underperformance may look like the culprit. The vital aspect to consider is the overall allocation to equity, debt etc. and whether you are giving adequate time to your investments.

Joydeep Sen is a Corporate Trainer and Author

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