At any point of your investment journey, earning more on your investments is always a welcome idea. However, if the investments in your portfolio are currently underperforming, or worse, you’re losing too much money, you need to be pro-active about strategies to grow your portfolio. This article will detail a step-by-step process starting from things you can do immediately to how you can maintain a winning portfolio.

A brief answer on how to turn your investments into a winning portfolio is to first get out of the rot, liquidate what is necessary and effectively reinvest your money. The questions that follow are how do you go about these? For example, how do you know where to invest your money? Keep reading to understand what to do at every step of the way.

4 steps to rebalance an underperforming portfolio

  1. Evaluate your current situation against your investment objective and strategy: When you find yourself in a hole, stop digging! Take a pause from making any ‘big moves’ to assess what is happening. There are several reasons why your portfolio is currently underperforming. You may have made bad investments, you failed to understand your goals, objectives, and risk appetite, you took your eye off your investments for too long, general market condition and exogenous factors etc. At this point, there is no need berating yourself about the causes, you only need to be self-aware enough to identify them. This will allow you decide if you are to stick with your strategy or it’s time to cut your losses and move on, at this point you may need professional advice on the best way out (you don’t always have to sell everything off).
  2. Learn from what just happened: Now you have been burned, it hurt so you should learn from it. You may not have all the solutions yet but take a note of what you did wrong the last time. This is easier to do when you understand how investment products work e.g., the difference between stocks, bonds and treasury bills. You may even want to go back to the basics to understand what to consider when building an investment portfolio because let’s face it, your portfolio probably didn’t suit your goals and risk appetite. Once one (1) and two (2) are done, it is now time to rebalance your portfolio in line with your set investment objectives (e.g., liquidity, growth, capital preservation etc.)
  3. Optimize your portfolio based on market realities: This may involve going underweight/overweight some investments or asset classes or outrightly cutting your losses and moving on freeing up cash for other opportunities. Here are some considerations that may guide this process: Sell non-fundamental underperforming stocks to free up cash for opportunities; Manage your expenses by rotating out of high expense mutual funds and moving to passive funds.
  4. Reinvest proceeds: Before you figure out what to invest in, think about whether you want to do it DIY or with a professional portfolio manager. You have a lot of options at this point but bear in mind that your investment should align with your goals, lifestyle, time horizon and risk appetite. You should also only invest in things you understand, you may speak to an investment advisor to inquire about any investment product or dropping a message on the chat box. Here are some tips that may help you get it right at this point:
  • Keep track of financial insights and what happens in the market. You can do that on our research portal
  • Diversify into various asset classes. A good start would be Money market, fixed income, and equity markets securities. The ratio would depend on your unique goals and risk tolerance
  • Average down your cost by buying assets that will eventually perform better in the long run. Buy more when it is lower to lower your average cost
  • If you have long-term USD obligations, consider investing in a USD-denominated fixed-income investment or fund.

Restructuring your portfolio is not an overnight feat. Although you can get started right away with step 1 above, it takes some careful planning to successfully turn your underperforming assets into a winning portfolio. Do not think that you have to do any of these alone, CardinalStone’s investment advisors will help you figure out the best investment strategy for you.

It’ll be incomplete to round this off without stating that investment advice is never a one size fits all. Your investment strategy should help you achieve your goals otherwise your portfolio is always going to be a burden. Hence, at CardinalStone our investment advisors strive to understand you and your unique goals to guide you appropriately.

Contact us to get started on your journey to a winning portfolio today!

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