Spring has sprung, and the season of renewal is a good time to reevaluate the aspects of your finances that need annual attention. Today, we’re talking about your investment portfolio. If you haven’t reviewed and reallocated your portfolio recently, your allocation may be out of balance with your goals. So, it’s time to look at what has performed well for you, where you can strengthen your investments, and whether your level of risk is aligned with your preferences. Read on as we share how to dust off your investments this spring and conduct an investment portfolio review that will help you determine what to keep and what to toss.
Investment Portfolio Review Step 1: Assess Your Investment Objectives
The first step in evaluating your investments is to revisit your financial goals and investment objectives. Are you investing for retirement, a major purchase, or simply to grow your wealth? Your objectives will play a significant role in determining which investments align with your current needs.
Investment Portfolio Review Step 2: Review Performance
Take a close look at the historical performance of each investment in your portfolio. Pay attention to both the short-term and long-term returns. Investments that consistently underperform or no longer fit your investment strategy may be candidates for removal.
Investment Portfolio Review Step 3: Diversification and Risk
Diversification is a key principle of investment strategy. Evaluate your portfolio’s diversification and risk level. Investments that are overly concentrated in a single asset class or sector may pose higher risks. On the other hand, well-diversified investments can help spread risk and stabilize your portfolio.
Investment Portfolio Review Step 4: Cost Analysis
The costs associated with your investments can erode your returns – a fact that many investors fail to check before building their portfolios. Use this review as a time to assess the expense ratios, management fees, and taxes associated with each investment. Consider consolidating or eliminating investments with high fees or costs that outweigh the potential benefits.
Investment Portfolio Review Step 5: Changing Market Conditions
If there’s one thing that you can count on in the financial markets, it’s change! Consider how your investments have fared in the various market conditions we’ve experienced in recent times. Some investments may perform well in bull markets but struggle during bear markets. Ensure your portfolio is resilient and capable of weathering different market environments to gain greater pace of mind about your investments.
Investment Portfolio Review Step 6: Tax Implications
It’s important to note that you don’t want to make hasty decisions when it comes to your portfolio. Selling investments may have tax consequences. Be mindful of capital gains taxes and how they may impact your overall financial situation. You may want to consider tax-efficient strategies, such as tax-loss harvesting or strategic asset location, to minimize your tax liability. A financial advisor can be helpful in employing these types of strategies, which can be complex.
Investment Portfolio Review Step 7: Liquidity Needs
Assess your current and future liquidity needs. Are you holding onto investments that are difficult to sell quickly when cash is required? Maintaining a balance between liquid assets and long-term investments is crucial for financial flexibility – and we all know life throws us financial curve balls from time to time, making it imperative that we can roll with the punches.
Investment Portfolio Review Step 8: Align with Current Market Conditions
Market dynamics change over time. Consider whether your investments are aligned with the current economic and market conditions. Some assets may perform better during specific market cycles. A financial advisor can help you understand more about the market trends at play during any given time.
Investment Portfolio Review Step 9: Seek Professional Guidance
While we’ve mentioned a few specific instances where professional guidance can be especially helpful, it’s often beneficial to consult with a financial advisor to conduct your full portfolio review alongside you. An experienced professional can offer insights into the performance of your investments, suggest tax-efficient strategies, and identify adjustments that align with your financial goals.
Investment Portfolio Review Step 10: Making Decisions
Once you’ve assessed your portfolio, it’s time to make informed decisions. Investments that no longer align with your objectives, underperform consistently, or carry excessive costs may be prime candidates for removal. Consider reallocating the proceeds from sold investments into assets that better fit your current investment strategy.
Do You Need to Spring-Clean Your Portfolio?
Remember that the financial markets and your personal circumstances can evolve, so periodic reviews of your portfolio are essential – and spring is an opportune time to dust off what’s old and only keep what suits the future you desire! If you don’t yet work with a financial advisor on your investment strategy, contact us today to schedule your free consultation and learn more about our services. At Cash Financial, we offer investment management, tax planning, financial planning, life insurance strategies, and so much more. We look forward to helping you build strong finances for a secure future!
