A 5-point checklist for your annual portfolio review

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BUSINESS NEWS - A regular review of your investment portfolio is an important step to ensure that it is still structured to serve your financial goals and investment strategy.

The best way to manage your financial affairs will differ from one person to the next. However, reviewing the following five elements can make the difference between staying on track and trying to get back on track with your retirement goals.

Portfolio performance

The main reason to do an annual review is to see how your current investments perform. You want to be sure that the returns to date and projected returns will continue to provide for a comfortable retirement.

Leaving your money unchecked could produce losses or result in missed opportunities that could have provided a better return. However, you must also look at the bigger picture to avoid short-term reactions to market performance.

Personal priorities

It’s easy to understand that your needs are very different when you’re starting a career or setting out on your own. And especially when getting married and starting a family. These major changes demand a corresponding change in investment priorities.

So, your annual portfolio review is a great opportunity to assess how these changes impact your income, expenses, and cash flow.

Longer-term priorities

While it may sound like a contradiction, I advocate doing an annual (short-term) review to ensure that your long-term goals are still within reach.

I think it’s a smart idea to review your investments once a year because our lives, goals, and financial situations change, and market conditions also fluctuate. This is an opportunity to review your portfolio’s performance to check whether it’s still relevant for your current needs, as well as your plans for the future.

Events like getting married, or divorced, for instance, will change your current and future priorities in meaningful ways, and that demands a relook at your investments, your goals and whether you’re on track to meet your goals.

Financial situation

Your retirement investments cannot be seen in isolation, because your ability and willingness to invest for the future is based on your current situation.

Therefore, I suggest you also look at the following indicators of your financial health.

See what you’re saving

Do you have a ‘rainy day’ or emergency fund?
Are you saving enough for future expenses?

Risk tolerance

The last factor to consider when doing your annual review is where you sit on the risk appetite scale: high, medium or low?

Many factors, including major changes in your life, will influence this. For example, if you’re single and starting your career, you can be more aggressive with your investment choices because of the long investment horizon.

Factors to consider when reassessing your risk appetite during an annual review include:

Your age
How long do you plan to invest
Your financial goals
How much money you’re investing
Diversification
Your attitude towards risk

The bottom line is that your future financial security is too important to not check where you stand in relation to your goals.

Consult an advisor to run through this 5-point checklist. The value that an advisor brings is not only technical analysis but also professional insights into balancing your portfolio optimally.

* Ruan Breed is a financial advisor at Brenthurst Stellenbosch and Brenthurst George. ruan@brenthurstwealth.co.za