How to Complete your Semi-Annual Investment Review

Key Points:

• Ensure that your portfolio and investments are appropriate given your level of risk tolerance, goals, and make the necessary adjustments to stay the course
• Identify potential opportunities to increase tax efficiency and increase return
• Make adjustments to your financial plan to reflect life events or changes that could affect your goals

A portfolio and investment checkup is a great and effective way to measure the progress that you are making towards achieving your goals. It is extremely important to periodically review your finances and look at what’s working well, and uncover any issues that need to be addressed.

It is common practice for most long-term investors to review their portfolio once a year, however, given the increased geopolitical risk and uncertainty we face, it may be appropriate to complete this process more often. Additionally, a variety of things can happen over the course of a year that may impact your portfolio and long-term plan such as market developments, tax law changes, and life events such as the birth of a child.

Depending on your investing style and goals, you may choose to perform your review and analysis yourself or work with a professional who can walk you through the process and provide valuable insight. Whether your work alone or with a financial professional, the following points can help you manage the potential changes to your portfolio.

Analyze the Impact of Market Developments and Economic Events

The beginning of 2019 has been viewed positively by many market analysts who view the early gains as a snapback from the December 2018 lows. Although volatility had seemed to disappear, the relative calm was short lived. Depending on how close you are to retirement, you may want to consider lightening up on so-called “risk-on” assets such as common equities. But make sure not to get too conservative. Although the credit market expects the Federal Reserve to keep rates unchanged for the remainder of 2019, any moves based on expected rate increases in 2020 would have negative effects on your fixed income. No matter what your stage of life is or where you are in your working career, ensure that you rebalance your portfolio allocation according to your goals and risk tolerance, adjust your weightings by sector, industry segment, and credit quality, and incorporate strategies to weather any changes in interest rates.

Identify Opportunities for Tax Efficiency

If you expect to have some spare cash, or more than you did last year, you may want to consider using it to continue to build your emergency fund, pay down debt, or put it towards retirement contributions. On the other hand, if you expect to have a tax bill at year end, you may want to consider making a deductible contribution to a Traditional IRA to lower your taxable income. For 2019, IRA and 401(k) maximum contributions for individuals is now $6,000 and $19,000 respectively. Do you have an after-tax investment account? If the answer is yes, now is a good time to start keeping your eye on any losing positions you may have to begin thinking about how to best offset your active income at year end. You can offset up to $3,000 of active income with portfolio losses per year, and carry the rest forward indefinitely.

Make Changes to Your Financial Plan

Life can get pretty busy and hectic and it is easier than ever to get lost in the daily hustle and lose track of long-term goals. In the last six months have you gotten married, adopted or gave birth to a child, experienced the death of a loved one, or taken a new job? If you answer is yes, it’s important to make sure that your finances are positioned and aligned with your new situation. At this time, you may want to reprioritize a savings goal, consider life insurance coverage, start a college savings plan, or update your will and beneficiaries.

No matter what the last six months have brought to bear, it’s always important to schedule some time to review your finances. In addition to the numerous educational resources available to you, guidance from an experienced wealth advisor can help ensure that your investment strategy and financial plan is appropriate for your risk tolerance, time horizon, and long-term financial goals. For more information about investing, financial planning, or just to chat about financial planning, send me an email at [email protected]