Over time and without your intervention, the characteristics of your portfolio will change. Ignoring these changes can be dangerous to your financial health. There are no set guidelines for how often you should review, analyze, and rebalance your portfolio. Some individuals check the risk of their portfolio on a weekly or even a daily basis. I suggest that the more volatile the
market, the more often you should analyze your portfolio’s risk exposure.

As part of your portfolio management, you’ll need to watch for unexpected changes that can affect your portfolio’s long-term objectives and plan for short-term volatility. If your portfolio is not performing to your expectations, don’t panic or ignore the problem. Find out what’s driving your portfolio’s performance. It may be that you’re taking on more risk than you originally
anticipated.

Online portfolio risk analysis measures the risk exposure of your assets to market risk. For individual investors, this analysis is often the first time they can determine whether their investment return is equal or better than their risk exposure. In the past, only financial institution had access to this type of analysis. The following are a few examples of the online financial institutional strength tools that can make certain that you don’t take on more risk than is necessary.

RiskGrades
RiskGrades offers free tools to determine your risk tolerance and to measure the risk of your assets. Assets are assigned a risk score from 0 for cash to 10,000 for highly risky stocks. The My Portfolio screen allows you to view the risk statistics of your portfolio. You can view your results as a table or graph. You can also print your results. RiskGrades provides definitions at the bottom of the page so that you don’t get confused. Click the statistic or story icon within each asset class.

RiskGrades allows you to analyze your investment style against benchmark indices, perform a risk ranking of your portfolio, and create a risk versus return chart to determine whether you’re being fairly compensated for the amount of risk you’re taking.

RiskGrades offers What If analyses so that you can try out different strategies to your portfolio. For example, if you buy or sell assets, what are the tax consequences? RiskGrades offers risk event analyses, price acceptability testing, a helpful risk map of the market, and an asset selector function. You can also find online tutorials about understanding risk and a risk profile quiz.

FinPortfolio
FinPortfolio is the Cadillac of online portfolio analysis tools. You find information about how to plan a portfolio that matches your investment goal and discover how to use online portfolio analyses to optimize your portfolio’s returns and minimize risk. Two levels of service are available for individual investors. Basic service is a set of easy-to-use planning and analysis modules that provide interactive guidance and support through the financial planning and investment decision-making process. You can track up to 50 stocks or funds in one portfolio and perform analysis on up to 5 stocks or funds at no charge. You can import portfolio data from other financial Web sites and screen investment candidates, research assets based on risk and return, and perform risk analysis. The premium service extends the basic service by offering additional online portfolio management related services, including the ability to track up to 100 stocks or funds in up to 5 portfolios, perform analyses of 30 stocks or funds across multiple portfolios, and create up to 5 multiple-goal financial plans. Premium subscriptions are $100 per quarter or $300 per year.

Morningstar
Morningstar has one of the better online portfolio management programs for mutual funds. First, set up the free portfolio at the Web site.

If you want Premium Portfolio X-Rays, you have to become a member. Membership is $12.95 per month (or $115 per year). X-Ray Reports includes information on fees and expenses for each of your mutual funds, indicates how all your assets (cash, stocks, bonds, and others) are allocated in your personal portfolio, and shows the fundamental statistics for each of your holdings (P/E ratio, price-to-book ratio, and earnings growth). With Premium Portfolio X-Rays, you can check for your Stock Stats. This feature of the portfolio management program looks into the equities you own individually and those held by your mutual funds, and then tallies the total percentage that is invested in each company. For example, assume that 10 percent of your portfolio is invested in individual shares of Cisco, and you have two mutual funds that recently invested in Cisco. The total percentage of Cisco holding in your portfolio is now 17 percent. That’s stock overlap. Stock overlap can defeat your attempt at reducing investing risk with diversification. In this situation, you might consider replacing the number of shares you own in Cisco with an equal amount of shares (that meet your investor requirements) in a different industry.

To determine your portfolio’s asset allocations, Premium Portfolio X-Rays looks into the holdings of your mutual funds and then analyzes the total of all your portfolio’s assets. For example, assume that your entire portfolio is invested in equities and mutual funds. Using this X-Ray feature, you might discover that about 4 percent of your portfolio is in bonds held by mutual
fund companies. Overall, Premium Portfolio X-Rays enable you to gain better control of your personal finances.