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Portfolio analysis is a procedure where managers evaluate the profitability of a number of products and services a business is offering. It is aimed at helping optimize the sharing of resources among those products and services. While portfolio analysis is a very useful tool for thinking about how to optimize return on investment, it does have a few limitations.
Even with the most careful planning and portfolio construction, past performance is never a guarantee for future results. Even the most thought out investment strategies can fail given the proper circumstances. Additionally, investment objectives can change over time. For example, from long-term growth during the early stages of a career to preservation of capital during retirement, a portfolio analysis will need to be done periodically to make sure your investments are in line with your objectives.
it also has some advantages such as
portfolio analysis also is advantageous in minimizing the tax impact on portfolio returns. Depending on such variables as the type of account, security type and tax bracket of the investor, taxation can eat into returns and make otherwise attractive investments mediocre at best. A portfolio analysis with a focus on tax efficiency may prove advantageous in identifying ways to structure investments to minimize the impact of taxes and increase the net return to the investor.
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Dec 3rd, 2015
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