Course 301: How to Monitor Your Portfolio, Part 1
Monitoring the Characteristics of Your Portfolio
In this course
1 Introduction
2 Your Monitoring Procedures
3 Monitoring the Characteristics of Your Portfolio
4 Monitoring the Fundamentals of Your Mutual Funds
5 Monitoring Performance

The first step in the portfolio-monitoring process is to take a close look at your portfolio’s characteristics. Are there significant developments that merit your attention?

Portfolios aren't static. They change without us doing anything to them. That's because market forces will make some investments perform better than others--which means they'll take up more of our assets. Or fund managers buy and sell securities, and in doing so, they change underlying portfolios of your mutual funds and the look of your overall portfolio.

Ignore these changes and you may end up with a portfolio that's very different from the one you originally put together. Ignore these changes and you may be taking on more risk than you think. Finally, ignore these changes and you may not meet your goals.

Look for unexpected changes in your portfolio. If you find some, you need to determine how significant these changes are and if they in any way threaten your long-term investment plan or your portfolio's short-term volatility characteristics.

Investors can enter their portfolios in the easy-to-use InstantX-Ray tool, or they can useMorningstar.com's Portfolio Manager to monitor their portfolios' characteristics via the Portfolio X-Ray tab for more comprehensive analysis. Either way, you'll get an X-ray of your portfolio holdings combined together. You'll find out how your portfolio looks from a series of key vantage points.

Asset Allocation

How does this current asset allocation compare to the original asset mix that you established for yourself? If the mix is off-base, it may be time to rebalance. We cover rebalancing inPortfolio 305.

Style Box Diversification

How does this style mix compare with your original mix? If things differ dramatically, you might consider rebalancing here, too.

Stock Sector

What segments of the stock market is your portfolio most and least exposed to? Is this what you expected? And how does it compare with your original sector mix?

Stock Type

You may find that you have a lot of investments that are of the samestock typeor in the same stages of their life cycles. That isn't a bad thing, per se. But having too many aggressive and speculative growth investments can lead to lots of volatility.

World Regions

How diverse are your investments around the globe today, and how do these figures comparewith the global mix you set up for yourself originally?

Stocks Stats

Is your portfolio carrying a high price/earnings ratio, making it more vulnerable to price risk than it may have been when you initially invested?

Top-10 Holdings

How much of your assets are in each of your investments? Is this amount significantly different that it was last time you checked in? If so, you may need to rebalance.

Next: Monitoring the Fundamentals of Your Mutual Funds >>


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