As we approach a new year, it’s an opportune time to reflect on your financial journey and assess the performance of your investment portfolio. Conducting a comprehensive investment review allows you to gain insights into how your investments have performed, identify areas of strength and weakness, and strategize for the year ahead. In this article, we will guide you through the process of evaluating your portfolio and planning for a successful financial future.
Step 1: Assessing Portfolio Performance
The first step in the investment review process is to assess the performance of your portfolio. Look at each investment’s returns over the past year, three years, and five years, if possible. Compare the performance of your portfolio as a whole to relevant benchmarks. Keep in mind that short-term fluctuations are common in the financial markets, so focus on the long-term performance and the alignment with your investment objectives and risk tolerance.
Step 2: Reviewing Asset Allocation
Asset allocation is a crucial aspect of portfolio management. Evaluate your current asset allocation to ensure it aligns with your financial goals and risk tolerance. A well-diversified portfolio spreads risk across various asset classes, such as stocks, bonds, real estate, and cash. Adjust your allocation if necessary to maintain a balanced and risk-appropriate portfolio as you work through your investment review.
Step 3: Rebalancing Your Portfolio
Market fluctuations can cause your portfolio’s asset allocation to deviate from your intended targets. Rebalancing involves adjusting the asset allocation back to its original proportions. By rebalancing regularly, typically annually, you ensure that your portfolio remains in line with your long-term goals and risk tolerance. Rebalancing can also provide opportunities to buy undervalued assets and sell overvalued ones.
Step 4: Analyzing Individual Investments
In this step in the investment review process, you’ll take a closer look at each individual investment within your portfolio. Assess whether the reasons for initially including each investment still hold true. Review the fundamentals, management team, and outlook for each company or asset. If an investment no longer aligns with your investment strategy or has changed fundamentally, consider replacing it with a more suitable alternative.
Step 5: Considering Tax Implications
Investment decisions can have significant tax implications. As you complete your investment review, keep your tax situation in mind. Selling investments can trigger capital gains taxes, while tax-efficient investments can help minimize your tax liability. Consult with a tax advisor to strategize on the best approach to manage taxes within your investment portfolio.
Step 6: Reevaluating Financial Goals
As you evaluate your investment portfolio, take the time to reevaluate your financial goals, too. Assess whether your objectives have changed, and if so, make adjustments to your investment strategy accordingly. Whether you are saving for retirement, education, or other milestones, aligning your investments with your goals is essential for long-term success.
Step 7: Working with a Financial Advisor
Navigating the complexities of the investment landscape can be challenging, so don’t worry if some of the steps above feel confusing or overwhelming. Consider working with a trusted financial advisor to conduct your investment review and plan for the year ahead. A financial advisor can provide objective insights, personalized advice, and expertise to help you make informed decisions and stay on track toward your financial goals.
Would You Like Assistance With Your Investment Review?
An investment review is a valuable exercise that allows you to assess the performance of your portfolio, ensure proper asset allocation, and realign your investments with your financial objectives. As we approach the new year, take the time to conduct a thorough evaluation of your investments, considering performance, asset allocation, individual holdings, tax implications, and financial goals.
Working with a financial advisor can provide you with the guidance and support needed to make informed decisions and create a well-rounded investment strategy for the year ahead. If you’d like to schedule a conversation with a member of the Attleboro Wealth Management team, please reach out. Remember, proactive portfolio management is key to achieving long-term financial success!
