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How Do I Effectively Manage My Portfolio?


  • Asset allocation provides balance and helps reduce your exposure to risk
  • Determine your risk exposure before designing your portfolio
  • Education is powerful
  • Free resources like the U.S Securities and Exchange Commission (SEC), Morningstar, and Market

Before we go any further, take a deep breath. Managing a portfolio doesn’t need to be difficult or intimidating. Given the right amount of practice, time, and knowledge, you’ll be on your way to feeling empowered in making personal finance decisions.

Contrary to popular belief, the task of managing a portfolio can be simple if you follow the tips and tricks of expert investors. When you plan on investing in the long-term, it’s important to learn the behaviors of a smart investor or else you may wind up making mistakes. Spending time to learn how to manage your funds will pay off in the future as you continue evolving your strategy and portfolio.

Risk Exposure

First things first, make sure to balance out the risk exposure within your portfolio. Building a margin of safety, or a built-in cushion allowing for some losses, in your portfolio is not only going to make you feel better at night but may help in the case of a market downturn. You can also mitigate your exposure to risk by slowing down, taking your time before buying and selling, and resisting buying and selling purely on emotional impulses. At the end of the day, decreasing your risk can help you maximize an investment’s return in the long-run.

Do Your Research

Choose your investments wisely. Just because you heard that so-and-so startup is the next hot new thing, resist going all in, right away. Be prudent with your investments by researching the company and whatever news is available on the stock. Evaluate stocks based on facts, not emotions.

Here’s a checklist of items you can run through when evaluating what to invest in.

  • Price
  • Revenue growth
  • Earnings per share
  • Dividend yield
  • Market capitalization
  • Historical prices

Make sure all of the stars line up before throwing your hard-earned money at it. Yes, doing research will take some time. But if you ask any investor, they’ll tell you it makes all the difference.

Access Online Resources 

Resources like the U.S Securities and Exchange Commission (SEC), Morningstar, and MarketWatch are all free and offer fantastic investment advice. In addition to this, set aside time each day to read charts and study market trends. Just like in any field, knowledge is power.

As Warren Buffet said during the 2002 Berkshire Hathaway annual meeting “You’re not looking at things that wiggle up and down on charts, or that people send you little missives on, you know, saying buy this because it’s going up next week, or it’s going to split, or the dividend’s going to get increased, or whatever, but instead you’re buying a business.” This is what happens when you make a choice to invest in anything. This can be stock in a company or real estate.

Asset Allocation

Make sure you are following the golden rule of “asset allocation”. Asset allocation is a mix of cash, stocks, bonds, and bank certificate deposits (CDs). Exercising a strategy that includes a long-term mix of assets is ideal for any level investor – from novice to seasoned. By leveraging asset allocation in your portfolio you decrease exposure when markets are volatile.

Create A Personal Sell Rule

To protect the money you have, you may want to set up a “sell rule”. For example, when a stock falls more than 7% off the purchase price, you sell. This is an ideal strategy if your portfolio has a low risk tolerance. When you have a sell rule that you stick to you can protect yourself from major losses in the market. That way, if one stock underperforms it’s not as painful to your account value. The risk and reward is spread across multiple funds.

“Your assets are your employees. Invest more on those performing well. Let the non performers go.” ― Manoj Arora From the Rat Race to Financial Freedom

Rebalance Your Portfolio

Rebalancing your portfolio annually or semiannually is something that the SEC highly recommends. Rebalancing reiterates the rules that you originally set up – such as risk exposure or perhaps the 7% sell rule. Analyze each one of your stocks to make sure they are on the right track for an upward trend. If your portfolio has an asset class that’s weighted heavier than others it’s important to make adjustments so all asset classes are even and balanced. After you rebalance your portfolio, you may find that there is room to purchase new stocks. Now you can use your knowledge of the market to make a purchase, as this is the appropriate time to do so.


The last thing to consider when effectively managing your own portfolio is taxes. If you don’t feel comfortable with taxes, you can always bring in a tax advisor. In fact, this is recommended by most investors. Knowing all of the tax implications before buying and selling real estate, stocks, and bonds will put you in the best position to optimize your portfolio. But in general, you may want to consider putting your most tax-advantaged investments into taxable accounts and the least tax-advantaged investments into accounts like a traditional IRA, 401K, deferred annuity, or a Roth IRA.


How do I effectively manage my portfolio?

Quick Quiz

Review and answer these two questions to move on to the next section in the course.

What is asset allocation?

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What is the SEC?

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