Module: 3 - Portfolio Investment Process - Portfolio Monitoring

C. Portfolio Monitoring

The last stage in the portfolio investment process consists of monitoring portfolio returns in order to determine which speculative decisions seem to be adding value to the portfolio and to ascertain that the portfolio's objective and constraints are being met and have not changes. There are 3 aspects to this monitoring. First, the actual portfolio held should be examined to ascertain that it is in compliance with the statement of investment policy and to determine whether any passive rebalancing of the asset mix is required. Second, investment performance should be reviewed. This should consist of a review of returns on:

1. the aggregate portfolio;

2. each asset class and investment manager;

3. the returns from any speculative strategies employed.

Finally, adjustments to the statement of investment policies and investment managers should be made if necessary.

The portfolio monitoring stage is as follows:

Portfolio Monitoring Stage figure-4

Portfolio management assumes periodic supervision of the security in the portfolio. Buy-and-hold philosophy, in present competitive society and in view of the fluctuations of the stock market, is not a very prudent, conservative, or a rational plan of action for sound portfolio management.