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What is Portfolio Analysis?

Mary McMahon
By
Updated May 16, 2024
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Portfolio analysis is an evaluation of an investment portfolio to determine if it is meeting an investor's needs, whether the investor is a multinational corporation or a teacher planning for retirement. The analysis provides a breakdown of current assets in the portfolio, along with a discussion of their current and historic performance to see if the investor is making smart decisions about resource allocation. The analysis can offer recommendations for improving the mixture of the portfolio, taking the unique needs of the investor into account.

Investment software with portfolio analysis functions is available. The investor enters all the holdings he currently has and the software runs a variety of algorithms to provide a comprehensive overview of the mix of assets in the portfolio. Investors can change parameters in the software to get recommendations on maintaining a portfolio that will meet their needs; for example, a risk-averse investor could ask if a mixture of assets is appropriate for her approach, or if she needs to divest some assets and add new ones.

Brokers and analysts also offer this as a service. People investing through a full service broker usually get portfolio analysis as part of their service package, and can meet with a financial adviser to talk about their needs. Investors can also request and pay for analysis if they are handling their own assets or working with a broker who offers more limited services. Full service brokers can be expensive, and people who only want periodic assistance and guidance may find it more cost effective to consult an expert when they need one, rather than paying to keep one on call.

When an analyst does the work, he will look at the portfolio, discuss the client's needs, and develop a detailed portfolio analysis, discussing the strong and weak points and how to improve the balance of assets. People may find it helpful to do this as their lives change and they make decisions like buying homes or changing employers. For people preparing for retirement, it can be good to conduct a portfolio analysis in the interests of changing the mix of investments to make them less risky, ensuring that funds will be available when they are ready to stop working.

The depth of a portfolio analysis can vary considerably. More extensive analysis can provide people with a wealth of information they may use to adjust investment strategies. Basic analysis will offer a quick overview to determine if a portfolio is heading in the right direction or needs a course correction.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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