This is also called as portfolio evaluation and portfolio revision. Most of the investors must be wondering as to why there is a need for revising the portfolio. For example last year you had invested 75% in shares and 25% in bonds and your portfolio had given you returns of 15%. These figures look good but is it good to continue with the same portfolio…..??? experts say thatinvestor must revise his portfolio. Some of the reasons that are given in support of their view are;
- The economic conditions are changing continuously, so the securities that had done well during previous year may or may not do well this year
- The changes in the monetary policies, fiscal policies which are revised every now and then have their own implications on the market and which in turn have an effect on earnings of the investor.
- The changes that have taken place in the companies can also have an effect on the earning capacity of the company, hence affect earnings.
- The phase (Bullish or Bearish) of the markets have an implications on the earnings of a portfolio.
- Prices of shares keep changing and there are some phases when the share prices are very low. So to encash on this situation an investor needs to revise his portfolio. For example you are holding 100 shares (price of each share is rupees 90) of company XYZ. Your total investment in this case would be 9000 rupees. Now due to some news or changes in some policies which are not in favor ofmarkets prices of all the stocks fall so is the case with these shares. Suppose the prices of this share falls to 75 rupees. Now same investor with same 9000 rupees can buy more number of shares if he had sold some of shares or thought of revising his portfolio.