How to Manage Your Own Investment Portfolio

Managing your investment portfolio is something every investor needs to do — with the goal to keep your risk low and your returns high. 

While you can pay a professional to make these financial decisions, you don’t have to. And you don’t need to be an expert to try DIY personal portfolio management. 

Whether you’re a beginner investor or you’ve been socking away funds for years, learning how to manage your own investment portfolio will put you in a more secure financial position.

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Importance of Portfolio Management

Your portfolio is the sum of all your investments across different asset classes and types of investments, such as stocks, bonds, real estate, and your retirement accounts. 

Learning how to manage your portfolio like a professional involves a bit of research and time, but it’s worth it. That’s because regular portfolio monitoring is essential to make sure you’re choosing the best blend of investments. 

Neglecting your portfolio could mean that you end up with too many volatile assets, putting your money at risk. Or your portfolio could end up too “safe” with minimal growth.

Thankfully, managing your own portfolio isn’t as scary as you might think.

READ MORE: How To Build Your Core Portfolio

How To Manage Your Portfolio Like a Professional

Portfolio management includes asset allocation, diversification, rebalancing, and tax considerations. 

You’ll also want to consider your risk tolerance to determine whether you’re an aggressive, conservative, or moderate investor. 

Finally, decide whether active or passive portfolio management is best for you.

Asset allocation

You’ll hear this term a lot when talking about portfolio management strategies. Asset allocation refers to spreading your investments among different asset classes — typically stocks, bonds, and cash. 

Asset allocation is a crucial part of managing your investments. Will you put all your money into stocks or will you divert a portion into U.S. Treasurys that are less volatile? 

When making asset allocation decisions, consider how different assets usually perform in the market. Also, look at your risk tolerance and time horizon — if you’re a younger investor (say, in your 20s), you can afford to take greater risks because you have time to make up for periods of loss.

Stock investments are your highest-risk, highest-reward investments, while cash is the lowest-risk, lowest-reward asset class. Bonds, like U.S. Treasurys, fall somewhere in between on the risk scale. 

You don’t need to monitor your asset allocation daily. It’s something you can do automatically with a robo-advisor or you can check when you rebalance your portfolio — more on that in a moment. 

One tool you may be interested in using to manage your portfolio is Webull. It's a user-friendly investment app that also offers a robo-advisor feature. With Webull, you can buy and sell stocks and exchange-traded funds (ETFs), and it also offers more advanced securities, like options and crypto.

READ MORE: Webull Review: How It Compares for Beginner Investors

Diversification

The second key of portfolio management is diversification. 

Although diversification is similar to asset allocation, it refers to how you invest within each of the asset classes. Think of your asset allocation as the first step in categorizing your investments, while diversification goes one step further in spreading out your risk. 

For example, say stocks make up 70% of your portfolio. That’s asset allocation. But to diversify, choose different types of stocks. 

Here are a few things to consider for diversification:

• Growth stocks versus value stocks (growth stocks may increase faster but are riskier, while value stocks are more stable)
• Small-cap versus large-cap stocks (small-cap may grow more quickly while large-cap may be more steady)
• Contrasting sectors (don’t put all your money into one industry, like all tech stocks or all fashion stocks)
• U.S. stocks and bonds versus international assets
• Bonds from different issuers or with different maturity dates

Your goal is to hold assets that will increase in value while others may drop, lowering your vulnerability to market volatility. 

An easy path to diversification is investing in index funds, which include shares of a wide range of companies that track a stock market index.  

Rebalancing 

Personal portfolio management is a long game, and you’ll need to rebalance your portfolio periodically. 

Your investments are constantly changing — dipping or increasing in response to market conditions. As such, your asset allocation will shift over time.

For example, let’s say you’ve kept 60% of your portfolio in stocks, 20% in bonds, and 20% in cash. But then there’s a surge in one of the industries you invest in, and your stocks shoot up. Your allocation has now shifted to 70% in stocks. 

Now you’re exposed to greater risk than you wanted, so it’s a good time to rebalance and sell off some of those stocks to divert the funds elsewhere.

Rebalancing is also necessary as you grow older and need to adjust to a more conservative approach. 

As a DIY portfolio manager, choose a rebalancing plan that works for your schedule. You might be happy doing your portfolio rebalancing every three, six, or 12 months.

Aggressive vs. conservative strategies

The broadest types of DIY portfolio management strategies are aggressive and conservative. 

• Aggressive investing puts a larger percentage of your money in potentially high-growth, but also high-risk assets. 
• Conservative investing is a a more stable strategy with less growth potential, but also less risk. 

There’s always a middle ground, too. 

Deciding how aggressively to invest goes back to asset allocation. Here’s an easy rule of thumb: subtract your age from 100, and invest that percentage of your money in stocks.

For example, if you’re 35 years old and following that guideline, you’d put 65% of your portfolio in stocks, with the remaining 35% going into safer investments like bonds. 

Age 50? Put half your money into the stock market. 

This isn’t a perfect rule, though, so consider your own capacity to handle risk. 

Tax-efficient investing

You can’t avoid taxes entirely but look for investment tax advantages. 

For example, 401(k)s and traditional IRAs reduce your taxable income today, while Roth 401(k)s and IRAs offer a break in the future, with tax-free qualified distributions and tax-free growth. 

Tax-loss harvesting is selling off investments that have lost value to offset others that have gained, effectively lowering your tax bill. 

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Active vs. passive investing

Generally, investing styles fall into either active or passive.

• Active investing refers to investing with the goal of profiting from frequent market fluctuations. You’re regularly buying and selling to “beat” the market.
• Passive investing is when you grow investments slowly over time. Rather than try to time the market by selling off low-performing assets, you ride it out — also called the buy-and-hold strategy.

Most DIY portfolio managers don’t have the time or expertise to be effective active investors. 

Passive investing is also often cheaper and actually yields better returns. Start early and buy investments to hold long-term to realize the most gains.

READ MORE: Active vs. Passive Investing: Which Is Best?

FAQs

How much does an investment manager cost?

You could hand your portfolio management over to a professional, but then you’ll pay an annual fee. The fee is usually a percentage of your assets under management (AUM). 

Fees vary by firm and how actively you want the manager to monitor your investments, but according to Advisory HQ research, in 2023, average advisory fees ranged from 1.18% for $50,000 AUM down to 0.59% for $30 million. 

For $1 million AUM, the average was 1.02%, or $10,200 per year. 

Robo-advisors offer a good in-between option. Robo-advisors often charge 0% to 0.25% of assets managed. 

What should my investment portfolio look like?

Personal portfolio management has no one-size-fits-all guideline, and your ideal portfolio will change over time. 

Decide how aggressive or conservative you want to be, and how active a role in portfolio management you’ll take. Choose investments from different asset classes, cover different areas within those classes, and rebalance your portfolio regularly. 

TL;DR

If you’re willing to put in a bit of time and effort, you can be a successful DIY portfolio manager. 

Consider the pillars of portfolio risk management: asset allocation, diversification, rebalancing, and conservative versus aggressive strategies. 

Your overall goal is to select investments from multiple asset classes that balance out your risk, keeping in line with your time horizon and financial goals. 

For more investing insights, check out these episodes of the Erika Taught Me podcast:

• The Missing Piece in 99% of Financial Advice
• How To Invest for Beginners (Step by Step)
• Why the Rich Get Richer

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