Education Centre

Learning path for self-directed investors who want to know more about financial markets and investing

Evaluating and optimizing your investment strategy

Once you have constructed your portfolio, it is crucial to monitor it and review your holdings regularly to ensure that your strategy is still optimal for your situation.

The frequency of your review depends on the type of investments you have made. With mutual funds, you can review their relevance to your situation once a year while in the case of equities, it is best to revise your portfolio quarterly – even monthly, weekly or daily, depending on the securities you hold and the trending news affecting them (e.g., financial results).

Comparing your portfolio's performance to that of an appropriate benchmark is a useful exercise for monitoring purposes. Benchmark comparisons can help you determine if your investment approach is delivering the desired results, or whether changes might be called for. Investment benchmarks are also helpful for developing realistic expectations about returns your portfolio can generate over the long term.

Investment benchmarks usually provide a broad measure of the return generated by specific asset classes over a given period. They are often referred to as reference indices since the most common form of investment benchmark is an index - such as a stock or bond index.

A benchmark must replicate the security or portfolio you are monitoring as closely as possible for the comparison to be meaningful. Examples of benchmarks would include the S&P/TSX for Canadian stocks, the DEX Universe for Canadian bonds and the S&P 500 for U.S. stocks. For instance, if your return is higher, your stock picking strategy has outperformed the market!

For a portfolio composed of securities from several different asset classes, the appropriate benchmark would be a blend of indices weighted according to the portfolio's asset mix.

For more information about comparing your portfolio's return to a benchmark, please don't hesitate to contact us.


With the vast diversity of exchange-traded funds (ETF), it is now easier to compare your individual holdings with an ETF of that sector. For instance, if you hold precious metal stocks, you can evaluate their returns against those of an ETF invested in precious metal.

Do not make it harder on yourself; we have tools at your disposal!

With National Bank Direct Brokerage, you are not alone. To guide you in your investment process, we have developed an array of tools, such as the “Performance” section of our website, which allows you to obtain an overview of your returns for specific periods. With this, you can compare your earnings year over year, and understand the variations that have occurred: is the increase due to newly injected capital or is it the result of an important economic event that has affected the value of your investment?

Do not forget that to be successful in your investment strategy, it is essential to stay on top of market news and developments that can affect your financial situation and the success rate of your projects. For that reason, we strongly recommend that you subscribe to the publications that matter to you. These regular updates will not only keep you informed, but also accompany you in making judicious decisions with respect to your portfolio.

For more in-depth analyses…

The tools to which you have access with your National Bank Direct Brokerage account are designed to simplify your life. Yet, we know that some of you prefer to push things a bit further and we have not forgotten about you. If you are looking for more thorough analyses of your portfolio, it is important to know that there are two main schools of thoughts when it comes to evaluating securities: fundamental analysis and technical analysis.

These two types of analyses represent more in-depth ways to evaluate the profitability or risk of a given stock. They should be used in conjunction with other elements, such as the current environment, economic data and investor forecast.

Fundamental analysis
Using a company’s financial reports, fundamental analysis aims to predict a company's future stock price by analyzing its current price. It seeks to determine the company’s intrinsic value and potential future value.

Fundamental analysis relies on the annual report – that is, the company’s financial statements, balance sheets and cash flows. With this information, a company’s financial ratios are constructed to help investors evaluate the financial health of the entity.

This data must however be used carefully, because each ratio used independently is not very revealing. Plus, their interpretation varies depending on the industry so the results are relative to the sector in which the company operates. They are indicators, not proof of current or future profitability.
Technical analysis

Technical analysis is the study of historical data about the stock markets and financial securities in an effort to forecast future price trends. Using charts as the primary tool, investors analyze fluctuations and past prices in order to forecast typical patterns in reaction to a particular market situation.



Technical analysis is based on three assumptions:

– Security prices or market behaviour reflect all available information
– Price fluctuations follow trends that can last quite a long time
– History repeats itself


With the help of charts, this type of analysis examines different cycles to determine when the market will move in a particular direction, factoring in investor psychology.

In addition to the above methods, volume and price analyses provide a lot of complementary information. Supply and demand, which cause prices to fluctuate in order to strike a balance between buyers and sellers, enable us to confirm information obtained through other methods and indicators.

You may hear of quantitative analysis, a type of technical analysis that is based on mathematics alone. Mobile averages and oscillators are the most frequently used. In these two categories, we find Relative Strength Index (RSI), Bollinger bands and Moving Average Convergence Divergence (MACD).

Economic forecasts play an important role in quantitative analysis. They allow us to evaluate the potential economic growth and risks of drops in a sector’s activities, among others. Interest rates, unemployment rates and other macroeconomic variables help identify, even predict, long-term conditions.

Finally, sector analyses serve to evaluate a company within a broader scope. It focuses on industry leaders, sector growth potential, product/service positioning and new market entries.

If analysis strategies interest you and you would like to learn more about how to use them, visit our Events page to register for an upcoming seminar on the subject. You can also have a listen at our Market-Q and Recognia demos, those high-performance tools that allow you to track market fluctuations.

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