The 4-Step Investment Health Check

In some ways, an investment health check is much like a medical health check. Both should be performed regularly; both can uncover any risks you may be exposed to and both can help you get back on track.

Here are the four things you can do to assess your portfolio and check if it’s heading in the right direction.

Step 1 – Get the right tools for the job

Firstly, I’m going to let you in on the worst kept secret: there’s an app for that! There are many apps that can help you with even the simplest of tasks, and reviewing and managing your investment portfolio is no exception. Some that come to mind are Sharesight and Stocklight but there is likely to be a whole host of apps on offer. Most online share trading platforms also have research tools, charting and information that can help make it easier to get your investment portfolio in order. Have a look and a play, because some apps and share trading platforms can provide the transparency you probably didn’t realise you needed.

Related article: 4 Investment Apps to Help You Manage Your Portfolio

If you’re comparing Online Share Trading companies, the comparison table below displays some of the companies available on Canstar’s database with links to the company’s website. The information displayed is based on an average of 6 trades per month. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical). Use Canstar’s Online Share Trading comparison selector to view a wider range of Online Share Trading companies.

Step 2 – Review your goals

It’s easy over time to lose sight of why you’re investing, or how you’re tracking towards your goal. Redefining where you’re going and how far along you are already, will help you assess whether your current mix of growth and defensive assets is still fit for purpose.

For example, consider an investor who invested $10,000 five years ago with a view to double it in 10 years and put it towards a home. Perhaps the market has been particularly good for the past five years and the investor is closer to reaching their goal than they expected. This is a great opportunity to either reconsider the goal, reconsider the time-frame of buying that property or reconsider how much risk is in their portfolio – so that getting to that goal is a smoother ride.

Related article: Investing for Beginners – Identifying Your Needs

Step 3 – Check that you’re diversified

For most investors, diversification is an essential technique that can help reduce the risk of your portfolio. Think of the saying ‘don’t put all your eggs in one basket,’ that is the theory behind diversification in a nut shell, or should I say egg shell.  When reviewing your portfolio check that your investments are spread across different asset classes, industry sectors and countries.

Related article: To Diversify or Not to Diversify

Step 4 – Rebalance your portfolio

Rebalancing your portfolio is the process of selling and buying assets to ensure you are matching your ideal asset allocation. Effectively, rebalancing locks in some of your profits and allows you to purchase more of your investments that haven’t done as well.

For example, consider a portfolio with two investments that are split evenly (50/50). Company A’s share price goes up and Company B’s remains constant. The asset allocation then changes to 60% sitting in Company A and 40% in Company B, rather than 50/50. To rebalance, the investor would sell some of Company A and purchase some more of Company B until the 50/50 split is once again achieved. For more information, check out this article on common financial ratios.

BONUS TIP: Keep up-to-date with investment news

Many factors can have an impact on markets, whether it’s an impending trade war or a company merger. Keeping an ear to the ground can help you better understand where a market may be headed, and possibly your investment portfolio as well. So hopefully, when you next check your portfolio’s performance you’re not blind-sided by what you see.

Luckily, Canstar Investor Hub can be your eyes and ears with all things investment related. You can follow us on Facebook and X.