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3 questions can help you tune up your investment portfolio

Investment and Asset Management

Your financial portfolio is always a work in progress. No matter how carefully you match your investments to your goals, changing market conditions and life’s evolving priorities have a cumulative effect — until one day you realize that your portfolio is no longer aligned with your objectives. To remain financially healthy, periodically re-evaluate your investments by asking these three questions.

1. Has my portfolio changed?

Over time, you’re likely to find that your asset mix has drifted from your original target. For example, the percentages devoted to stocks, bonds, and alternative investments, or between categories of an individual asset class, such as small- vs. large-cap stocks, generally shift over time.

If one asset type has performed particularly well (or poorly), your carefully thought-out allocation might look very different today than it did when you first set it up. Specifically, market movements may have left one or more of your asset classes over-or underrepresented relative to your target. If this happens, you may decide to rebalance your portfolio — selling a portion of one type of security that has outperformed and adding to a type that has underperformed.

Be aware that rebalancing your portfolio may have tax implications. Ask your advisor how often you should do so, given your individual situation.

2. Have my investments changed?

In addition to your portfolio’s allocations, your individual investments can also change over time. Stocks and mutual funds are rarely “set it and forget it” investments, as business conditions are constantly shifting and the prices at which the securities are trading are always in flux.

If you own individual securities or mutual funds, you’ll want to work with your advisor to make sure these investments continue to serve their intended purpose in your portfolio. For individual stocks, for example, reassess the business fundamentals of the underlying companies. With mutual funds, make sure their underlying strategy and management haven’t changed. You’ll also want to compare long-term results to those of a relevant benchmark to ensure your funds are still meeting your expectations.

3. Has my personal situation changed?

Your financial situation and your goals change over time, and a portfolio that suited you in the past may no longer be appropriate. For example, as you near retirement, your capacity to handle investment risk may change as the number of income-earning years ahead of your decreases. In such a situation, you might want to pivot toward income-oriented securities and reduce your exposure to the kind of volatile assets you owned earlier in your investing years.

Other personal factors come into play as well. Marriage, the birth of a child, a career change, or increased responsibilities for aging parents could all result in revised financial objectives. When your objectives change, your portfolio will likely need to change with them.  

Get to work

A portfolio that’s in sync with evolving market conditions and your financial situation involves regular portfolio checkups with your advisor. Together, you can determine the optimal schedule for rebalancing your investment mix and review your goals to make sure you’re appropriately invested for the future you envision.