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Portfolio Revision and Monitoring

ArticleID 117  
Writer Isaac Thuku
Category Personal Article



Portfolio revision is the process of selling certain issues in portfolio and purchasing new ones to replace them.

Why is portfolio revision important?

• As the economy evolves, certain industries and companies become either less or more attractive as investments;


• The investor over the time may change his/her investment objectives and in this way his/ her portfolio isn't longer optimal;


• The constant need for diversification of the portfolio. Individual securities in the portfolio often change in risk-return characteristics and their diversification effect may be lessened.



Three areas to monitor when implementing investor’s portfolio revision:


1. Changes in market conditions;


2. Changes in investor’s circumstances;


3. Asset mix in the portfolio.


The need to monitor changes in the market is obvious. Investment decisions are made in dynamic investment environment, where changes occur permanently. The key macroeconomic indicators (such as GDP growth, inflation rate, interest rates, others), as well as the new information about industries and companies should be observed by investor on the regular basis, because these changes can influence the returns and risk of the investments in the portfolio. Investors can monitor these changes using various sources of information, especially specialized websites (most frequently used are presented in relevant websites). It is important to identify the major changes in the investment environment and to assess whether these changes should negatively influence the investor’s current portfolio. If it so, the investor must take actions to re-balance their portfolio. When monitoring the changes in the investor’s circumstances, the following aspects must be taken into account:


• Change in wealth


• Change in time horizon


• Change in liquidity requirements


• Change in tax circumstances


• Change in legal considerations


• Change in other circumstances and investor’s needs.


These factors must be carefully considered if you want to build the best investment portfolio.



Portfolio Revision and Monitoring
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