When do you need to reassess your portfolio?

Interest rate changes

Changes in interest rates may have an effect on the economy and the sharemarket as a whole. When interest rates rise, it becomes more expensive for companies to borrow funds to finance their growth plans. Higher interest rates may also dampen consumer demand for goods and services, meaning some companies will see a drop in sales revenue. If a company becomes less profitable, or investors perceive that income growth is slowing, this could be reflected by a drop in the company’s share price.

It goes the other way too. When interest rates fall, companies may feel more confident in borrowing money to grow their operations, and consumers may feel more confident in spending on goods and services. Generally speaking, these influences could boost investor interest in consumer-dependent companies, which may be reflected in their share prices.

Changes or potential changes in government policies

Changes or potential changes in government policy can also be a cause for investors to review their portfolios.

Changes in other asset markets

Falling home prices may have an impact on the operating environment and financial conditions for a raft of companies such as banks, retailers, building material suppliers, and property developers. So keeping up to date with what’s happening in other asset markets, like the property market, may have an influence on your sharemarket investments.

Company performance

Companies are required to keep investors informed of any fundamental changes in their circumstances. Larger companies generally report on their performance results at least twice a year, although some may report up to four times a year.

These results contain a wealth of information, from historical financials to forward-looking statements. The forward-looking statements can be highly significant, as they will tell you what the company’s management team expects for the future, and investors always need to be forward-looking. While companies may report solid growth in earnings and revenue, a key issue is whether the performance can be sustained. Both past financial results and investor opinion on future conditions will affect a company’s share price.

Other potential company-level impacts:

• Changes to the competitive landscape in which a company operates
• Changes to a company’s strategies or plans
• Changes to company management
• Decisions to buy other businesses or sell parts of the business

What to look out for in the media

Financial news

Keep an eye on financial news for any insights that might relate to your share investments or the sectors that they operate in. These insights could be positive or negative, so you might consider either increasing or decreasing some of your shareholdings in response.

Analyst research reports

An analyst of a company may have a more detailed understanding of how an individual company operates, and you can take advantage of their published research reports of findings and recommendations. Even though these reports are based on the opinion of the analyst, they might contain some insights that are useful for investors, including an assessment of the health of the company’s balance sheet. If you have a CommSec account, you can view these reports by logging in to the website, going to Quotes & Research, and searching for a company.

ASX announcements

You should continually review any significant announcements from companies you’re invested in, as these might have an impact on your portfolio. Announcements are also available on the CommSec website under Quotes & Research (after you’ve logged in).

The bottom line

The performance of your investments could be impacted by economic events, or by changes in the financial position or the strategies of individual companies in your portfolio. To make sure your portfolio stays in line with your objectives, you may need to keep an eye out for these events and consider adjusting your shareholdings as necessary. If in doubt, check with your financial adviser.