A reassessment of your portfolio can help you observe if it is well structured, or is it in a good position for a larger upward movement in a further decrease adjustment from the last year and a half.
Here are four essential criteria for a portfolio evaluation, suggested by some experts:
Undoubtedly, the profitability is one of the key parameters for evaluation of your portfolio. It includes aggregate profitability, achieved by your positions, according to that one of the market taken as a whole. In this case, we take a representative stock index, which could be SOFIX or BG40. It is important to compare the profitability for one and the same period.
Your portfolio is well-structured if its profitability is equal or greater than that one on the market. You may compare the profitability you have achieved for a longer period, or for a smaller one. It is better to compare the profitability of your portfolio for period of correction of indices, as in order to be well positioned to emerge from this crisis, it is recommended to be higher than that one of the index.
Make deeper analysis of profit positions. This will give you an idea what are the weak and the strong points in your portfolio. Some of them can be changed, and heaviness of others to be increased, depending on their performance.
The risk is a very important component in any portfolio. Its assessment, however, must go beyond the limits of statistical indicators and standard deviation.
The risk of the portfolio should correspond to your specific requirements and goals. At the same time, you must skillfully weigh the proportion risk-income, not to be in a position to take too high risk, against a lower premium.
Properly selected portfolio should perfectly meet your criteria for risk, or the so-called risk tolerance.
To be continued…