Broker Check

Investment Portfolio Analysis

Whether it's your first time looking for where to invest money or you need to maximize your portfolio's growth, it's vital to analyze existing options. Making a profit is harder without a comprehensive portfolio analysis. Every investor has unique goals and capabilities, so there's no one-fit-for-all. Here's an overview of investment portfolio analysis and why it's important:

<h2><b>What is Investment Portfolio Analysis?</b></h2>

What is Investment Portfolio Analysis?

Investment portfolio analysis refers to examining an investment portfolio to determine if it meets your investment needs, resources, preferences. The study should also measure how likely an investment portfolio will meet your goals. An investment portfolio seeks to determine where to invest money and follows a risk-adjusted basis.

The focus is often on the overall asset class performance over the years. Investors can put their money into equities, bonds, and alternative investments like real estate. Portfolio analysis measures performance on a relative and absolute basis and assesses associated risks. Here are some tools used to analyze investment portfolios:

Holding Period Return: Calculates the total return during the investment holding duration or the profit you'll make from your investment within a given period.

Arithmetic Mean: Calculates the average returns of the portfolio. Arithmetic mean adds returns from all investments and divides the figure by the number of investments.

Sharpe Ratio: Determine the excess return on risk-free return per portfolio unit. Its calculation account for the expected return, risk-free rate of return, and volatility.

Other Calculations: Investment portfolio analysis features various other calculations, including tracking error, information ratio, and Sortino ratio.

How Investment Portfolio Analysis Work

An investment portfolio is a mix of investments for a specific client. To analyze the portfolio, you must identify all assets and their unique characteristics. Working with an investment consultant will help you evaluate existing assets and their likelihood of holding their price/value. Here are three steps involved in portfolio analysis:

a) Harmonizing Investor Expectation with Market Characteristics
Investors have varying ambitions and expectations. The first step to portfolio analysis involves syncing the expectations and the markets in which the client plans to invest. Proper harmony between investor expectations, the risks, returns, and market characteristics are vital to achieving the portfolio's goals/mandates.

b) Deciding on Asset Allocation and Deployment Strategy
Asset allocation and deployment strategy are scientific processes with personal biases. Investors should determine the types of assets to feature in their portfolio and how to analyze them. The process also includes identifying the benchmark for comparing and frequency of measuring the performance of your portfolio.

c) Performance Evaluation and Necessary Adjustments
Investment analysis defines the period and frequency for analyzing portfolio performance. After the stated duration, an analysis will reveal whether the portfolio performs as desired or whether changes are necessary. Investor goals/objectives can also shift, and it's upon the investment advisor to incorporate them to ensure up-to-date portfolio analysis and track client expectations.

Why Is Investment Portfolio Analysis Important?

The benefits of investment portfolio analysis are obvious and straightforward. For first-time investors, portfolio analysis provides insights into where to invest money. Existing investors can also make changes to realign with former objectives or set new goals for maximum portfolio growth. Popular advantages of investment analysis include:

  • Assess the performance of a portfolio periodically to gauge whether there's a need to tweak the investment strategies.
  • Derives risk-adjusted returns by comparing the portfolio against a benchmark and examining the risks undertaken to achieve the benchmark returns.
  • Realign investment strategies with the changing objectives of the portfolio investor.
  • Separates underperformance and outperformance to allocate investments accordingly.
  • Assesses how specific portfolios have performed in the past to inform current and future investment decisions.


Portfolio analyses are best left to an experienced investment advisor. There are thousands of investment units, and very few have a history of the top quartile. Analysis can examine recorded metrics and provide actionable insights for the right investments. You can identify where to invest money and make ongoing changes with insights from periodic analysis, to meet portfolio objectives. Investment analysis is a complicated process you should navigate alone. Work with a professional investment advisor to find out more about your options and best investment practices.

Frequently Asked Questions

What is the importance of investment analysis?
An investment analysis allows investors to choose the best mix of assets and investments for their portfolios. The objective of the analysis is to keep track of all developments and ensure the investor achieves projected returns.

What does an investment portfolio analysis include?
Investment analyses may include charting past returns, predicting future performance, and selecting the best investment for investors' needs. The process also involves evaluating individual assets/securities to determine risks, price movements, and potential returns.

Should I get an investment analysis if I am near retirement?
Yes. Investment analysis is for all investors as it identifies where to invest and tracks portfolio performance. If anything, you should get an analysis more frequently when nearing retirement to realign your expectations and goals and make necessary changes to maximize returns.

For more information about our firm and the services we offer, send us a quick email or call the office. We would welcome the opportunity to speak with you.  |  973-726-4600 x0