How to Manage Your Financial Portfolio

If your portfolio isn’t doing as well as you hoped, it’s time to improve it. Add profitable stocks, build safeguards, and diversify. You may wish to consider factor analysis software to help you evaluate your portfolios’ style factor exposures and understand the drivers behind factor performance and risk. Here are five ways to wisely manage your portfolio.
1. Decide to Invest: Large vs. Small U.S. Companies
Large companies attract most investor’s attention, but it isn’t necessarily the most profitable type of company. Smaller companies have earned a higher rate of return than larger companies over a 35 year period. In the short-term, however, smaller companies do have more risk. Large companies’ stability is an important asset to have in any portfolio. Just add a few small companies that have a lot of potential. Consider adding a few start-ups as well. It’s worth the gamble.
2. Add One or Two International Stocks
International small-cap stocks show even more promise. Between 1970 and 2004 small international companies out-performed large international companies by 6.1% in terms of compound annual return. International companies in general out-performed U.S. companies over a 35 year period. Although the margin is small (international companies – 13.5% vs U.S companies – 12.1%), it’s an area of investing that isn’t taken advantage of. Adding one or two international companies to your portfolio will give you more opportunity to increase your profit.
3. Decide Value vs. Growth Companies
Most investors select growth companies over value companies. Growth companies grow at a much faster rate than the rest of the economy, and they generally avoid paying dividends to stockholders. Instead, the company typically re-invests their earnings back into the company. Value companies trade at a lower price than expected and are undervalued.
How to Manage Your Financial Portfolio
Typically, a value company has a higher book-to-market price ratio than growth companies. This characteristic provides some insight into which type of stock has been more profitable over the years. Stocks from large value U.S. companies out-performed stocks from large growth companies since 1964.
These value companies had a compound rate of return of 13.7%, while these growth companies only had a compound rate of return of 9.6%.  For small US companies, the profit difference is even greater, with small value companies having a compound rate of return of 17.1%. Add more value companies to your portfolio.
For more information about value and growth stocks, turn to professionals like financial professional Peter Briger.
4. Know the Best No-Load Funds to Own
Index funds and asset class funds are the best no-load funds to own. These mutual funds don’t charge you anything to put money in or take money out. They also don’t have the restrictions of managed funds.
5. Protect Your Portfolio from Volatility with Short Term Bonds
To make up for potential losses from stocks, invest in short-term bonds. Over one to five years, these bonds will have a positive rate of return.  
By following this advice, you can turn around your poorly performing portfolio and start earning a profit again. It may take some time, but investing in the stock market is worth it.

Denny Jones

Hello, I'm Denny Jones, the voice and mind behind this personal finance blog. With a passion for helping others achieve financial independence, I started this blog to share my insights, experiences, and strategies in managing money. Whether you're just starting out on your financial journey or looking for advanced tips to optimize your wealth, my goal is to provide practical and actionable advice that anyone can follow.

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