Criteria for portfolio evaluation (continued)

portfolio_evaluation
Portfolio evaluation

A reassessment of your portfolio can help you to consider if it is well structured, or if it is in a good position for a larger upward movement in a further decrease adjustment from the last year and a half.

Here are the rest of our suggestions for a portfolio evaluation:

Diversification

Recently, there are a lot of contradictions related to this issue – how far and to what extent we should diversify. This dispute becomes extremely relevant in a state of fully synchronous movement of markets around the world, sectors and almost all asset classes in condition of crisis that we see.

For a perfectly diversified portfolio specialists again, cannot find the correct number, as we definitely could say that the degree of diversification is bound by the size of the portfolio and the relevant market. As a rule, investors are advised to keep in their portfolio at least between 4 and 7 positions, not to be totally exposed to specific risks, associated with particular company or sector.

There are experts who recommend a large number of items, for example 40, but taking into account the reality of native stock market, it might be difficult to find such a large liquid companies.

Expenses

There are several academic studies that confirm the thesis that the investment costs are one of the most important factors affecting the performance of your portfolio in a long term perspective. Keeping assets in funds with high fees is usually expressed in lower than the market rate.

Fundamental is the truth that we cannot control the movement direction in the prices of financial assets. However, the costs are one of the few things that are under our direct control.

Choose a broker whose trading conditions fit more to your trading style and requirements. This can save you a significant amount of money in a long perspective. Search for the smallest details in contracts, such as fees for transfer of funds, high fees if you decide to move your portfolio to another broker, etc. Some financial institutions have skilfully accepted such terms.

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