FF Challenge – Day 27: Monitor and Balance Your Portfolio

Good morning guys and welcome to Day 27 of the Financial Freedom Challenge! 🙂 Today we’re going to work on a financial goal (again). Moreover, it is an action that you’ll need to put into practice throughout your life so pay attention.

Are you ready?

FF Challenge - Day 27: Monitor and Balance Your Portfolio

What’s today’s task?

Once we’ve created our Investment Portfolio we need to periodically monitor it.

What do I mean by monitoring it?

You just need to check how it’s performing over time. You don’t have to do it on a daily basis. My suggestion is to monitor it every month. Choose a specific day of the month and plan your monthly monitoring.

Moreover, you can monitor it in many ways:

  • On Excel
  • Using an app (Personal Capital Finance, SigFig Wealth Management, Yahoo! Finance..)
  • Using a Software (Quicken Premier 2015, Personal Portfolio Manager, Investment Account Manager 2.0..)
  • On paper

I’m currently using Excel to monitor my Investment Portfolio and for the moment I don’t think about changing.

In addition to this, we also need to rebalance our Portfolio. We need to do it for many reasons. In particular, because this action allows staying on track with your target (asset allocation).

What do I mean by asset allocation?

Every well diversified Investment Portfolio contains many financial instruments (stocks, bonds..). It is well-diversified only if there is a balance in the percentages of the contained financial assets. A portfolio composed by 95% of stocks and 5% of bonds is not well diversified. Instead, a portfolio composed by 60% stocks and 40% bonds is certainly better diversified.

Our ultimate goal is to keep these percentages in line with our target. We need to always take into consideration the risk related to a certain financial instrument. As we know stocks are riskier than bonds. If you start from a portfolio 60% stocks – 40% bonds and after one year you have a portfolio 75% stocks – 25% bonds the new portfolio is riskier than the initial one.

I’m not saying that you always have to keep the initial percentages. Every year you have to analyze your “investor profile” (I mean time horizon, risk tolerance and so on) and adapt your Investment Portfolio to your profile.

I made simplified a example. For instance, if you consider my Investment Portfolio it has many more components (and I’ll add more in the next months) so balancing it is not so simple as in the previous examples but the basic concept is the same.

I suggest you rebalance your Portfolio on two occasions:

  • Once per year on a certain day (for instance, the 1st of October)
  • Whenever your asset allocation gets too far away from your target asset allocation (for instance, you start with a 60%-40% asset allocation and you decide to rebalance is whenever it moves away 5% or 10% from this point)

These are the basic concept of Monitoring and Rebalancing an Investment Portfolio. Obviously, we could go much deeper into this subject but I think that for the moment this is enough.

A brief summary of today’s task of the Financial Freedom Challenge

  1. Understand the concepts of Monitoring and Rebalancing a Portfolio
  2. Choose a specific day of the month and monitor your Portfolio every month on that day
  3. Choose a specific day of the year and rebalance your Portfolio every year on that day
  4. In case your asset allocation moves too far away from your target (5%, 10%), rebalance your Portfolio

Final recommendations

This was Day 27 of the Financial Freedom Challenge. As you will have understood, things start to get serious. So it’s very important for you to clearly understand this step. If you have any questions, write a comment and I’ll be glad to answer you 🙂

Besides share in the comments your opinion about this step. Do you already monitor (and rebalance) your Investment Portfolio? If yes, how?

Come back tomorrow for Day 28. I’ll be here for you! Remember to follow us on Facebook and Instagram! Share this challenge on your social media: this will keep you motivated during the path, trust me 🙂 If you want direct contact with me (answers, discussions, doubts, advice…) and the other participants, join our Telegram groups (ENG Group, ITA Group).

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2 Replies to “FF Challenge – Day 27: Monitor and Balance Your Portfolio”

  1. thanks for the article. is it possible to make downloadable your excel file (without your personal data off course) for a quick start?


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