How to Do a Mid-Year Wellness Check on Your Investments: Review, Renew, Rebalance
Leisl L. Cording, CFP®
Senior Vice President & Financial Advisor
We always remind our clients that investing is not a “set it and forget it” proposition. Building wealth in order to achieve your goals requires smart strategy and long-term commitment. But maintaining a healthy investment portfolio also requires regular care and attention. In short, you have to continually Plan Well and Invest Well if you want to Live Well.
While some people are happy to check in on their investments frequently, most don’t have it at the top of their long to-do list that’s already filled with life’s day-to-day responsibilities. And while there’s no need to check in daily or even weekly (that’s what your financial planner is for!), you should check in at least periodically.
The middle of the year is an ideal time to do a “wellness check” on your investments. With half the year behind you to evaluate the performance of your investments and the other half still ahead to see gains from any adjustments you might make, it’s a great opportunity to review your investments, renew your strategy and rebalance your investments as necessary to keep on track toward your goals. Here's how to do a mid-year review, renew and rebalance of your investments...
Step 1: Review your asset allocation and performance
Just because you chose to allocate your investments in a certain way, that doesn’t mean you’ll always find your portfolio the same way you left it. Market forces may quickly begin to tweak it. For example, if stock prices go up, you may eventually find yourself with a greater percentage of stocks in your portfolio than you want. If stock prices go down, you might worry that you won't be able to reach your financial goals. The same is true for bonds and other investments.
Do you have a strategy for dealing with those changes? You'll probably want to take a look at your individual investments, but you'll also want to think about your asset allocation. Just like your initial investing strategy, your game plan for fine-tuning your portfolio periodically should reflect your investing personality.
Even if you're happy with your overall returns and tell yourself, "if it's not broken, don't fix it," remember that your circumstances will change over time. Those changes may affect how well your investments match your goals, especially if they're unexpected. At a minimum, you should review the reasons for your initial choices to make sure they're still valid.
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Renew your commitment to your long-term strategy and goals.
Reviewing your portfolio can be stressful, particularly if it hasn’t performed as you’d hoped since you last checked in. But don’t panic. Instead, remind yourself of your long-term goals and renew your commitment to the long-game strategy that’s designed to get you there. Try to resist the impulse to change your strategy with every dip in the market or headline in the news. Timing the market correctly is very difficult; even professionals find it a challenge. Most people fare better by having an investment game plan that can weather good times and bad, and then sticking to it.
That being said, when asset allocations in your portfolio become unbalanced, you should absolutely work with your advisor to return to the right mix of investments for your strategy and your goals. Which brings us to the third and last step of the mid-year investment wellness check…
Rebalance your portfolio to match the markets and your goals.
Based on your portfolio review and overall strategy, decide what changes need to be made to your investments, if any, to stay on track toward your goals. If you’re finding that your portfolio has become unbalanced or is no longer aligned with your goals, consider how to adjust. You could maintain your current asset allocation strategy with part of your portfolio, and then with another portion, you could try to take advantage of short-term opportunities, or test specific areas that you and your financial advisor think might benefit from a more active investing approach. By monitoring your portfolio, you can always return to your original allocation.
Another possibility is to set a bottom line for your portfolio: a minimum dollar amount below which it cannot fall. If you want to explore actively managed or aggressive investments, you can do so — as long as your overall portfolio stays above your bottom line. If the portfolio's value begins to drop toward that figure, you would switch to very conservative investments that protect that baseline amount. If you want to try unfamiliar asset classes and you've got a financial cushion, this strategy allows allocation shifts while helping to protect your core portfolio.
This three-step “wellness checkup” for your investments does take a bit of time and effort, but just as with your regular health checkups, skipping it could be disastrous for your future. Having a knowledgeable and strategic partner can make the task a much lighter lift. Get in touch today to see how we can help you to build and maintain a strong strategy to Plan Well, Invest Well, and Live Well.
Presented by Vice President, Associate Financial Advisor Leisl L. Cording, CFP®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259, 860-928-2341. http://www.whzwealth.com (http://www.whzwealth.com).
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