Stay on Track: 5 key steps to follow to review your investment portfolio

Examining your investment portfolio is a vital measure to ensure it stays aligned with your financial objectives. As life circumstances evolve, such as the addition of dependents or approaching retirement, your risk tolerance may change. Conducting regular reviews allows you to evaluate whether your portfolio still corresponds to your present level of risk comfort. As your financial goals develop, it’s essential to reassess your portfolio to guarantee its ongoing alignment with your long-term plans, be it saving for a home, retirement, or other aspirations.

So, how should you go about evaluating your investment portfolio? Each portfolio necessitates a customized benchmark for assessment. Naturally, your long-term goals, specifically the funds needed for these objectives, serve as inherent benchmarks for conducting a portfolio review.

Collect necessary information

Gather account statements, reports, and any pertinent documents associated with your investments. This encompasses information about individual holdings (such as stocks, bonds, mutual funds, etc.), their purchase prices, current values, fees, and transaction records. Leverage online tools, portfolio management platforms, or a spreadsheet to consolidate and analyse all this information in one central location. This will simplify the review process.

Assess your investment portfolio

Compute the percentage distribution of various asset classes (stocks, bonds, real estate) in your portfolio. Contrast this with your predetermined target asset allocation, which you set based on your risk tolerance and investment objectives (e.g., aggressive, moderate, conservative). If the existing allocation varies considerably from your target, there may be a need for rebalancing.

Evaluate portfolio performance 

Monitor the individual performance of each investment and compare it to pertinent benchmarks. This may entail computing returns or contrasting them with suitable market indices. Identify any underperforming or notably divergent assets that require further scrutiny or potential adjustments.

Check for possible rebalancing

Should your asset allocation experience a substantial shift from your target due to market fluctuations, it may be imperative to consider rebalancing. Rebalancing entails the buying or selling of assets to realign with your desired allocation, thereby preserving diversification. This practice aids in risk management and ensures that your portfolio aligns with your established risk tolerance.

Review tax implications

Examine the tax consequences associated with your portfolio holdings. This entails comprehending elements such as capital gains taxes, dividends, and the advantages of tax-advantaged accounts to gauge potential tax liabilities. Investigate strategies to potentially enhance the tax efficiency of your portfolio, which may include holding specific assets in tax-advantaged accounts or considering tax-efficient investment options.

Frequently re-evaluate your long-term financial goals and risk tolerance. As your life changes, these factors may evolve, and your portfolio should adapt accordingly. This underscores the importance of conducting regular portfolio reviews.

Nevertheless, evaluating an investment portfolio is a task that goes beyond its apparent simplicity, emphasizing the necessity of consulting a financial advisor. An advisor does more than recommend investments; they delve into the comprehensive process of understanding your financial goals, risk tolerance, and your commitment to securing your finances in the long term.