What are the benefits of being an active portfolio participant?

Active Portfolio Participant What Does It Mean

Investing has proven to be a boon thanks to technology.  Today, a plethora of digital and automation tools make things seem a cakewalk. However, there remains an urgent need to keep a check on our portfolios to keep any hassle at bay that is likely to catch us off-guard.

Be An Active Investor

This way, you would be able to stay focused on your finances. However, this certainly doesn’t mean that as an active investor, you need to keep tracking your portfolio daily or remain in a state of panic depending on the financial news ticker. It rather means keeping track of the overall financial journey. Identifying your financial goals, risk tolerance, and time remain essential in this regard.  

Also, the growth in career graph should essentially match with the frequency of participation in your portfolio, which needs to be suitably altered accordingly.

The Need To Become An Active Investor

While keeping track of a long-term investment plan, considering what you are saving for and how long you must do it, remain a good habit for reaping financial success, it remains essential to be an active investor so that the current goals remain aligned as per the need of the hour and at the same time no investment opportunity is missed.

From time to time, financial goals may be required to be tweaked or interchanged, and this would be possible only if you remain an active investor in your portfolio.

Also read: How to Manage Market Risks And Keep Your Portfolio?

Taking The Plunge As An Active Investor

First, there is no need to get bogged down by financial jargon or terms. Knowledge related to a few key investment terms such as asset allocation, rebalancing and savings rate, among others, are more than enough to keep track as an active investor daily.

For instance, asset allocation pertains to how the investment portfolio is constructed, what is the balance between stocks, bonds and cash. By choosing the appropriate investment strategy, you can balance your risk tolerance and the potential rewards, as well as consider how long you might need to invest and the balance of growth and income-generating investments.

On the other hand, rebalancing remains a process that realigns your portfolio weightings to maintain your desired asset allocation. The changes in financial markets can affect your asset allocation. Hence, your portfolio can drift over or underweight in a particular area, and it can alter the amount of risk in your portfolio. Rebalancing your portfolio could be automated and you may require seeking a piece of advice from a financial advisor.

Over time, your goals and priorities would probably change, which may require you to reconsider your timelines, risk tolerance, and perhaps even the construction of your portfolio to meet new goals.

Also Read: How Asset Allocation Linked To Retirement Planning

As a final note, there’s your savings rate that is likely to change depending on your life stage and competing demands. The income in hand after taking care of the necessary payments could be kept aside for utilising in investments and savings.     

Ending Note

It is wise to not get carried away by the sentiments of the market, going by the jump and fall. The bottom line is, whenever in doubt, seek the help of a financial advisor. This could also save a lot of heartburn.