Start with any individual stocks you hold. Check whether the companies have performed up to your expectations, and consider whether your outlook for them remains positive. Also review the stock's valuation, to make sure it is still reasonable. A long run-up in stocks can cause valuations to grow beyond the level you think is appropriate. The following measures can help you decide whether a stock remains a good candidate for your portfolio:
- Fundamentals: Check essential business metrics such as earnings and sales numbers, as well as stock valuation measurements such as price-to-earnings and price-to-book ratios, and compare them with the company's peers.
- Analyst opinions: Market analysts' projections can help you evaluate the firms' outlooks.
If you have individual bonds in your portfolio, you should include a review of your holdings in your checkup. For corporate bonds, company fundamentals and analyst opinions can also be useful. For all types of bonds, be sure to review:
- Credit rating: Check to see if the ratings of your bonds have changed. If analysts have downgraded any of your holdings, it may mean your portfolio has taken on a higher level of risk.
- Duration: As time passes, the duration of your bond holdings will fall—meaning your portfolio may become less sensitive to rate changes. You should review this in light of your changing investment goals and the interest rate environment, and take it into account if you are reinvesting in bonds.