End of the Year: Time to Rethink Your Investment Strategy

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Investing ReviewAs always, the end of the year represents a time to reflect on the past — and to prepare for the future. While you consider your next move, don’t forget to review your investment strategy. While you don’t want to panic and change your strategy as a reaction to the short-term whims of the market, that doesn’t mean that you shouldn’t tweak your plan every now and then, or make adjustments as the situation requires.

Regularly Review Your Investment Strategy

For the buy and hold investor with a long-term strategy, there are few things worse than obsessively checking your portfolio every day or week. However, occasionally checking in to ensure that your investment strategy continues to meet your needs is a good idea. Here are some items to consider as you review your investment strategy

  • Does your asset allocation still make sense? Your asset allocation will change according to your goals. As you reach certain milestones, such as sending a child to college or retiring, you might need to shift your asset allocation. Consider your timeframe, and what you expect to happen in the next few years.
  • Overall, has your investment strategy been working for you? Consider how well your investment strategy has been working thus far. Have you been moving closer to your goals? Have circumstances changed that require some tweaking? Would a slightly different strategy better fulfill your financial requirements? Evaluate how well, overall, your investment strategy has been working.
  • Has something changed fundamentally in your investments? Another consideration is what has changed about your investments. If there has been a fundamental change in your investments, such as a change in management, or a loss of market share, it might be time to change things up a little bit. You might actually have some losing investments that you can sell now to reduce your tax liability.

Before you switch things up in your portfolio, consider your situation, and re-evaluate your goals and needs as an investor. Measure your portfolio, long-term, against your approaching milestones, your current needs, and what you hope to accomplish with your investment portfolio.

If something isn’t working, or if your situation is progressing, it might be time to tweak things a little bit. It’s possible to shift your asset allocation, as well as switch things up, if you need to. Are you more interested in increasing your income right now? It might be time to move some of your assets into an income portfolio. Do you want a little more growth? Maybe it’s time to shift some of your assets out of bonds and into stocks. Consider your needs, and act accordingly.

You can also take your tax situation into account, and make some moves that just happen to improve your tax efficiency, while at the same time adjusting your plan to better reflect your changing priorities and situation. Your life isn’t going to stay still, and while you don’t want to make drastic changes without reason, it doesn’t make sense to continue what may not be working for you. Review your investment strategy, and make the changes necessary.

(Photo: thinkpanama)

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