Constraints associated with portfolio revision

DESPITE associated merits, portfolio revision is also prone to a number of constraints. Investors should therefore have the necessary portfolio revision competence/skills in order to minimise the underlying impact. Below is a summary of some of the constraints that can be associated with portfolio revision.

Transaction costs: Buying and selling of securities involve transaction costs such as commission and brokerage fees. Frequent buying and selling of securities may push up transaction costs thereby reducing the gains from portfolio revision. Such transaction costs may act as a constraint to timely revision of portfolio.

Statutory Requirements: There are certain portfolio investments that are subject to statutory requirements. These requirements may constrain proper and timely portfolio revision. Consequently, as an investor, familiarise yourself with all the relevant statutory stipulations that affect may your investments.

Time: An investor should have a specific investment horizon over which he/she expects to achieve planned objectives. The shorter the time frame, the lower the chance of achieving the expected returns and vice versa. In this regard, adequate time should be provided for a portfolio revision strategy to bear fruit. As a result, portfolio revision is mostly suitable to patient and long term investors. No single methodology: Portfolio revision can be a difficult and time consuming exercise particularly considering that no standard methodology is clearly established. Investors may adopt different approaches based on different techniques. Consequently, complex portfolio revision process may act as a constraint to portfolio revision.

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