How to Review Your Investment Portfolio at the End of Every Year?

Before we start the process, it is important to understand why reviewing portfolio every year is necessary and one of the most important habit to develop; for long-term financial success. Many of us, gives more importance on selecting investments and forget that annual or semi-annual reviewing and adjusting of those investments are also equally important.

Once investment is done, “invest and forget” type of attitude is not affordable in current times. Asmarket conditions and our financial goals are changing, where our portfolio currently stands is necessary for us to know.

Before we start with the steps on how to review, lets first understand why does it matter to review at the end of every year? - We see overtime

• Value of our assets keeps changing

• Income, Expenses, risk ability, needs as well as responsibilities change

• New opportunities may arise

An annual portfolio review helps you understand how your money has performed until now, whether you are still on the track to meet your goals, and what changes are needed to improve returns and reduce risk.

This blog explains how to review your investment portfolio step by step.Here are the steps-

1. First make a list of all your investments:

   You can create a simple list by listing them in an excel file which may include your investments in mutual funds, gold, stocks, fixed deposits, PPF, insurance, real estate etc.Mention their date of investment, investment value, current value.This may help you check where all your money is invested.

2. Check the asset allocation of your investment portfolio:

   Asset allocation means how your money is divided amongall your investments. It is necessary to monitor how much weights do these investments currentlyhold in your portfolio?
   Thus, you need to compare your current allocationwith yourplanned/target allocation.
   For example:
   

   • Planned allocation: 60% equity, 30% FD, 10% gold

   • Current allocation: 72% equity, 20% FD, 8% gold

   Deviation would be cause of the market movements which disturbs your planned allocation, so if the gap seems big, it may be time to rebalance.

3. Define the Benchmark and Compare Performance against it:

   After the weights are known, now calculate the returns as per weights determined and then compare how your investments performed relative to their benchmarks, inflation rate etc.
   For example-

   Investment	Benchmark
   Fixed Deposit	5 Year Government Bond Yield
   PPF	10 Year Government Bond Yield
   Gold	Domestic price of Gold
   Large cap Equity Funds	Nifty 50 TRI

4. Evaluate Concentration Risk:

   Even if returns look good, portfolio may be exposed to hidden concentration risk. Concentration risk means when an investment portfolio has an excessive exposure to a single security, asset class, industry, or geographic region.Whereas, diversification aims to reduce the volatility and potential losses in your investment portfolio and then focusing on increasing returns. However,some investors, in an attempt to do investment diversification,invest in too many funds with overlapping holdings causing overexposure. Therefore, you need to check if there are too many funds with similar holdings or heavily weighted in some asset class or have overexposure to a similar theme or sector as it may reduce your returns.

5. Review Each Investment for Relevance:

   Avoid holding investments just because you invested in them long ago. Emotional biases should not affect your future growth.
   You may evaluate each investment by asking these questions-

   • Is there consistent underperformance in the investment compared to its benchmark?

   • Check market or economic changes?

   • Does this investment still align with my financial goals?

   • Do you need to increase or decrease any investments?

   • Has your goal horizon changed?

   • your liquidity needs increased?

   and many more.
   After review is complete, note the changes and plan for the next year.

6. Rebalancing:

   It is recommended to review your portfolio annually and rebalance when an asset class drifts more than 5%-10% from its target. Shifting assets to maintain your intended/target allocation ensures your portfolio continues to mirror as per your risk tolerance and goals.

7. Seek professional financial advice:

   If your portfolio is large or complex, or you don’t know how to calculate the returns or if you are unsure about decisions, consulting an investment specialist can help you in your financial journey.

Things to keep in mind before coming to a conclusion-

• Avoid judging investments based on just recent performance.

• Do not diversify excessively.

• Check for the tax changes.

• Don’t let any behavioural biases affect your financial growth journey.

Conclusion:

A year-end investment portfolio review is a powerful financial disciplineto ensure these holdings remain relevant to both market realities and your personal targets. By scheduling routine reviews, verifying fundamental performance, and rebalancing strategically, helps you protect gains, correct mistakes, manage risk, and stay focused on your financial journey.

However,diversifying portfolio may not guarantee profits or protect against all losses, but a well-diversified portfolio can help to smooth out market volatility and provide more consistent returns over time.An investment specialistcan help you determine the right asset allocation for your specific situation.

Disclaimer: This report is prepared in his personal capacity and neither the Author nor Money Honey Financial Services Pvt Ltd assumes any responsibility or liability for any error or omission in the content of the article. Investments in mutual funds and other risky assets are subject to market risks. Please seek advice from an investment professional before investing.