Portfolio Analysis

Careful portfolio analysis is necessary to ensure that you have the correct asset allocation according to your objectives and risk tolerance.

Long term investment returns are always directly determined by the types of assets held in an investor’s portfolio. An ideal portfolio mix can only be determined by first assessing a variety of critical factors such as: risk tolerance, personal income level, age range and investing time horizon.

Depending on these various factors, a portfolio mix (equities vs fixed income vs cash) can be determined to provide the highest possible probability of achieving a desired long-term rate of return while at the same time minimizing short-term financial risks.

Portfolio Analysis is the process by which an existing portfolio asset allocation is reviewed to determine whether the current allocation achieves the investor’s short and long term financial goals without taking unnecessary capital risks.

To achieve an optimal portfolio asset allocation, the individual investor must balance their portfolio goals with their risk tolerance. Owning growth-oriented assets is essential to help offset the long-term risk of inflation, but the rewards of growth also involve the short-term risks of enduring market volatility and uncertainty.

The analysis of an individual portfolio is best conducted by a professional who has the required knowledge and expertise to properly evaluate all the different variables that affect the long-term performance of different asset classes. Proper portfolio analysis is important to long-term financial success because each asset class within a portfolio comes with a different type of short and long term risk.

By measuring an investor’s short and long term investment goals against various investment possibilities and return probabilities, a Certified Financial Planner can assist an investor in determining the portfolio mix best suited to their unique situation.