On April 1, Yahoo Finance published an article that reminded investors of the importance of "spring cleaning" their portfolio this year, encouraging readers to reassess their financial goals and analyze their equities accordingly.
Robert Stammers, director of investor education at the CFA Institute, a global nonprofit comprising investment professionals in more than 100 countries, spoke to the source about this necessary task and offered his advice based on years of experience in the field.
"The market, just like the seasons, is constantly changing, so as investors we need to review our position, make new decisions and adapt our outlook," he said in an interview. "It's a bit like going to the dentist – we don't particularly like to do it and we should probably do it more often, but the more regularly you do it the less chance of a painful surprise."
One key part of spring cleaning your portfolio, according to Stammers, is assessing the level of risk you're comfortable taking on. Stammers reiterated that higher returns are generally associated with increased volatility, and as a result, investors should take steps to ensure their positions are updated to better reflect how aggressive or conservative they wish to be with their equities in the coming year.
Further, he advised readers to "be practical" by making decisions based on detailed analysis and not emotion. However, given the nature of investing, this last piece of advice can pose the biggest challenge. All too often, investors will hold on to equities that have provided returns in the past, even though they may now be part of sectors that aren't expected to offer the same risk/reward they once did.
At SmartStops, our portfolio monitoring service is designed to help you make calculated decisions based on current and historic market factors, and tools like our SmartStops Risk Barometer Index (SRBI)™ can allow you better manage your risk in the face of changing market conditions.
If you're thinking about spring cleaning your portfolio, consider doing so with the help of SmartStops. Find out why using the risk management methodology powering SmartStops is better than other methods by reviewing our performance studies today.
Categories: Risk Management, Trading & Portfolio Strategies