It is crucial to monitor your portfolio to maintain your investment strategy and evaluate the performance of your investments. Plus, regular monitoring may prevent you from reacting irrationally to market volatility and will enable you to recognize when there is in fact a need for a change to your investment portfolio.
Part of monitoring your portfolio is understanding the investments in your portfolio. Are you satisfied with their performance? Are they meeting your income needs and helping you achieve your objectives? Generally, there are three broad categories of investments.
Equities
Investments in which you own a share of a company (for example, common corporate stock).
Attributes:
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Potential for growth in value over time; may help fight inflation.
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Price swings are generally wider and more unpredictable than fixed income investments.
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May be better for reaching longer-term goals.
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Generally considered moderately aggressive.
Fixed income investments
You loan funds to a corporation or government entity and receive a fixed payback as your return (for example, corporate and government bonds, and bond mutual funds).
Attributes:
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Typically steady income and lower volatility than stocks; principal may be guaranteed if held to maturity.
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Over time, generally less effective against inflation than equities.
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May be better for reaching shorter-term goals.
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Generally considered conservative to moderate.
Cash and money market investments
Short-term investments and cash equivalents that can easily be turned into cash. These include U.S. Treasury bills, certificates of deposit, and other securities available in the money market, which consists primarily of short-term debt issues and loans.
Attributes:
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Minimal risk of losing invested money.
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Among the least volatile of investments over time.
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Typically lower returns than bonds.
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Considered conservative to moderate.
One of the most reliable methods of protecting your money is by diversifying your portfolio. Diversification may help reduce the overall risk of your portfolio but may not protect against the possibility of losing some or all of the money invested. Delaware Investments can help you understand:
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