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How To Evaluate An Investment Portfolio

Learn 4 ways to evaluate your investment portfolio. Build the perfect portfolio using Cube Wealth.
December 4, 2020

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Investing in the best assets is not enough. Because what’s best for you today may not be the best for you tomorrow! Investors either realise this too late or don’t realise it at all. But there's a solution to this - evaluating or assessing your portfolio.

Assessing your portfolio periodically can help you understand if you’re gaining profits or losing money. Furthermore, you must constantly nurture your portfolio to reap the rewards of profit in the future.

If both these aspects seem confusing, you've come to the right place. This blog will help you learn about 4 important ways to evaluate your existing portfolio.

4 Steps To Evaluate Your Portfolio

Step #1. Track Your Portfolio’s Performance

Check each investment’s returns and compare it to other schemes from the same category. This will help you understand how your investments are doing. But it’s important to note that you shouldn’t compare apples to oranges.

Comparing a stock to gold or a mutual fund scheme to P2P lending won’t get you anywhere. Instead, you can check your overall portfolio performance to gain insights.

But if this sounds lit a lot of effort, you'd be glad to know that there are trained experts who can do a financial check-up of your existing portfolio.

You can even use an MF analysis tool to evaluate the health of your mutual fund portfolio yourself. 

Step #2. Check Your Portfolio Allocation

Your portfolio allocation should have an ideal mix of diverse investment options like stocks, mutual funds, ETFs, gold, p2p lending, and more. A diverse portfolio may have a better chance of giving better returns over the long term while lowering the risk.  

Portfolio allocation may vary depending on factors like your investment goals, age, and risk profile. Even market trends may impact your portfolio allocation. 

Example: For stock allocation, investors are known to follow this golden rule: Subtract your age from 100. Whatever remains should be your stock allocation.

At 30 years old, you would allocate 70% of your portfolio to stocks. But this could vary based on your goals.

Step #3. Identify The Fees You’re Paying

Types of investment fees that you might have to pay: 

  • Expense ratio
  • Entry load
  • Exit load
  • Advisory fees
  • Transaction Fee
  • Brokerage charges 

Pay attention to these charges since they can eat into your profits. The age-old rule applies here: lower the fees the better.  

Step #4. Assess Your Goals

Your portfolio allocation is directly linked to your goals. If it isn’t, then that is a big issue that you need to address <immediately>. Goal-based investing can give you a clear idea of what should remain or be sold from your portfolio. </immediately>

For example, it would not be ideal to invest in mutual funds to finance your MBA in the next 2 years. Mutual funds are long term investments which are known to deliver profits over 5+ years.  

A trained expert can help you allocate your portfolio in investment options that are suitable for your goals. Otherwise, you would be shooting in the dark hoping that something would stick. 

How To Build The Perfect Portfolio?

Most investors may think of the perfect portfolio as a dream - something that is difficult to achieve in practice. However, following a structured investment approach by identifying your investment goals and risk appetite can kickstart your perfect portfolio journey.

An app like Cube Wealth can make it easier for you to build the perfect portfolio of investments using Cubes bucket philosophy:

 

Sr. No.

The Bucket

Timeframe

Purpose

1.

Emergency Funds Bucket

Lifetime

Illness, job loss, major repairs, etc.

2.

Protection Fund Bucket

Lifetime

Insurance

3. 

Short Term Fund Bucket

2 to 3 years

New car, MBA, wedding, etc.

4. 

Medium Term Fund Bucket

3 to 5 years

College fees, down payment, etc.

5. 

Long Term Fund Basket

5 to 10 years

Children’s education, buying a house, etc.

Summary

Evaluating your investment portfolio is crucial to achieving your financial goals. Timely assessments and quality feedback from a trained expert can help you rebalance your portfolio according to changing life goals and events.

In the end, the goal of portfolio evaluation is to build a perfect portfolio that helps you create wealth for the short, medium, and long term.  

Here is an in-app guide for Cube's perfect portfolio feature


Shriram Shekhar
Shriram is a Consultant at CubeWealth. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. His love for philosophy, developing products, and empowering people through quality content is what got him to CubeWealth.

Top 5 Reasons To Try Our Powerful Investment App!

Schedule a call based on your convenience. And get an expert to help you invest.

  • High Quality Mutual Funds
  • Top Notch Stock Advisory
  • Invest in U.S. Stocks
  • Alternative Investments
  • Low Minimum Investments
Try Cube’s Exclusive Wealth Concierge Service! We offer a 10-minute portfolio analysis and set up service to select users.

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