Are there 3 Easy Steps to Evaluating My Investments?Maybe!!! (2024)

Periodically evaluating your investments is crucial for maintaining a healthy portfolio and ensuring it aligns with your financial goals. Most financial advisors would normally suggest a review occur at least once - every 12 months. Here are three steps to get you started:

Step 1: Review Your Investment Objectives and Risk Tolerance

First of all, revisiting your investment objectives and risk tolerance is fundamental. Start by clearly defining your financial goals. Are you investing for one or more of the following: retirement, purchasing a house, or saving for your children's education? Assess if these goals have changed or evolved since your last evaluation.

Next, reassess your risk tolerance. This determines how much market volatility (significant swings that can occur both up and down in the unrealized value of your investments) you can handle. Many investors would describe themselves as either Conservative, Moderate or Aggressive or some combination of these descriptions. Has your tolerance for risk changed due to life circ*mstances, your anticipation of retiring soon or market experiences? Understanding your risk appetite is essential for maintaining a properly diversified portfolio that aligns with your comfort level.

Important Note: Many investors could benefit from a written Investment Policy Statement to help keep them on-track to reaching their goals and to help keep them from making purely emotional decisions when things get bumpy! The following link from Morningstar provides some additional information on this type of useful tool: https://www.morningstar.com/personal-finance/how-create-an-investment-policy-statement

Step 2: Analyze Portfolio Performance

Evaluate the performance of your investments against benchmarks and your own expectations. Here's how:

1. Review Asset Allocation: Ensure your investments are spread across different asset classes (stocks, bonds, international, real estate, etc.).

1. As is described below, analyze if the current allocation aligns with your strategy and risk tolerance. Rebalancing might be needed if certain assets have over or underperformed, causing a drift from your desired allocation.
2. Performance Evaluation: Compare your portfolio's performance against relevant benchmarks such as the S&P 500 Stock Index. Look beyond just absolute returns; consider risk-adjusted returns as well. Evaluate individual investments' performance against their peers and market averages. Identify underperforming assets or funds and assess whether they still fit into your investment strategy.
3. Cost Analysis: Assess the fees and expenses associated with your investments. High fees can significantly impact your overall returns. Consider if less expensive alternatives with similar performance exist, such as low-cost index funds or ETFs.

Step 3: Rebalance and Adjust

Based on your evaluation, take necessary actions to realign your portfolio:

1. Rebalancing: If your asset allocation has deviated significantly from your target, consider rebalancing. This involves selling some of your overperforming assets and buying some more of your underperforming ones to maintain the desired allocation. Rebalancing helps control risk and ensures your portfolio stays aligned with your goals.
2. Adjustments and Diversification: Consider making adjustments beyond rebalancing based on your performance evaluation. This might involve reallocating funds from underperforming assets to more promising ones. Diversification across sectors or industries can also reduce risk. Explore new investment opportunities that align with your objectives and risk tolerance.
3. Regular Monitoring: Develop a schedule for regular check-ins on your portfolio, but avoid overreacting to short-term market fluctuations. Set specific intervals (quarterly, semi-annually, or annually) for evaluations to maintain discipline without being swayed by temporary market movements.

Conclusion

Periodically evaluating your investments helps ensure that your portfolio stays in line with your financial objectives and risk tolerance. By reviewing your goals, analyzing performance, and making necessary adjustments, you can maintain a healthy investment portfolio that better positions you to achieve your long-term financial aspirations.

How can my firm help you take the first step toward a better financial future?

Whether you are:

> Considering adding an additional or complementary advisor

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> Thinking you might benefit from a Second Opinion on your current planning (even if you are managing your own finances)

Give me a call or send me a text to (704) 589-0941 to schedule a 15 minute “Get Acquainted Call” so I can learn a little about your situation, goals and needs. At the end of that call; we should have a good idea if we can assist you in the areas you desire and discuss appropriate next steps.