2020 has finally come to a close, a year that will always bring one word to mind: Covid! A majority of us spent this year entirely at home, and this unexpectedly gave us the opportunity to reflect on the key elements of our lives: work, relationships and hobbies.
Among other things, 2020 has also taught us, as investors, that regularly reviewing our investment portfolios will be monumentally important going into 2021. Read along to find out why.
What is an investment portfolio review?
It refers to the act of analysing one’s investment portfolio in detail, to determine its adequacy, in line with one’s preferences and objectives.
Why will it be so important in 2021?
There are numerous reasons why reviewing your investment portfolio will be key in 2021:
- Tracking portfolio performance: Since investments are made with an intent to earn returns, an investment portfolio review will help gauge if one’s financial objectives are on track.
- Asset allocation: At times, we set out with certain financial objectives but need to deviate from them depending on real-time market performance. A portfolio review can help catch such deviations and address them with actions.
- Covid-19 impact: The effectiveness of measures aimed at controlling the spread of Covid, its lasting social & economic impact across the globe and thereby, its impact on investment assets owned globally remain to be seen in 2021. With so many unknown variables, regularly reviewing one’s investment portfolios should be a priority for 2021.
- Changes in fund management and expenses: A periodic investment portfolio review will ensure that one does not miss changes in expense ratios, fund managers etc., and can take actions to mitigate risks as soon as one is aware of them.
- External factors: Major recent events such as geopolitical changes around the world, economic events like currency devaluations and natural disasters can impact the value of one’s investments. It is necessary to keep an eye on the impact of any such events in 2021, to be able to make investment decisions accordingly
- Tax planning: A comprehensive review of one’s investments facilitates proper tax planning for individuals and families. Since capital gains, interest and dividends are all subject to tax in varying degrees, portfolio reviews will help understand one’s tax implications in 2021 better.
How and when to conduct an investment portfolio review?
You can perform an investment portfolio review either yourself, if you have the financial know-how, or by hiring the services of a professional financial advisor or wealth manager.
Ideally, there should be a periodic rhythm built-in: typically quarterly, half-yearly or annually. For highly volatile assets, you could review them even more frequently, if required.
How can MProfit help?
Having provided portfolio reporting solutions for over 11 years, we at MProfit understand the true importance of a portfolio review for investors.
While conducting a detailed analysis can be a daunting task, MProfit is a smart, technology-enabled tool available in the market, that helps you keep track of your investment portfolios across different asset classes.
We have created solutions to suit investors, traders, family offices and high net worth individuals. We also have solutions catering specifically to financial advisors and brokers.
Our uniquely automated products offer a host of benefits that make investment portfolio management systematic, efficient and highly insightful.
From all of us here at MProfit, here’s wishing you a successful investing journey in 2021!