Why Regular Portfolio Reviews Can Boost Your Financial Health

Think of reviewing your investment portfolio regularly like performing routine maintenance on your car. Just as you regularly check your car’s oil, tire pressure, and brake pads to keep it running smoothly and prevent breakdowns, examining your investments helps you stay on track with your financial goals, identify areas that need adjustments, and keep your financial health in optimal condition.

As financial advisors in Buffalo Grove, IL, we specialize in helping our clients fine-tune their investment strategies, especially when major life events occur or there are significant changes to market conditions. 

Our blog will examine five important events that should cause you to review your portfolio regularly. Let’s get started.

Read: Navigating Market Volatility: The Power of Long-Term Investing 

Market Fluctuations

Regularly reviewing your portfolio during volatile market periods is crucial for adapting to changing financial conditions and ensuring your investments align with your risk tolerance and goals. 

Reviewing your portfolio can identify underperforming assets that may need rebalancing or adjustments to better position yourself in the face of market unpredictability. 

For example, if a significant market downturn impacts the technology sector disproportionately and your portfolio is heavily weighted in tech stocks, a timely review could prompt you to diversify your holdings, potentially minimizing losses and capitalizing on buying opportunities in more stable sectors of the economy.

Performance Assessment

Regularly reviewing your portfolio’s performance ensures that your investments meet expectations based on your financial goals and risk tolerance. This practice allows you to make informed decisions about rebalancing your portfolio, taking advantage of buying opportunities, and adjusting your strategy in response to changing market conditions or personal circumstances.

For instance, you need to monitor your portfolio to avoid signs of underperformance in certain assets, leading to potential losses or missed growth opportunities. You don’t want your portfolio to drift away from its intended asset allocation, which could expose you to higher risks or lower-than-expected returns.
Regular reviews allow you to maintain a balanced and diversified portfolio that remains aligned with your risk tolerance and investment goals.

Listen to our podcast on 2024 money resolutions.

Changing Financial Goals

Checking your portfolio for the impact of major life events is also important because these moments often lead to significant changes in your financial needs, goals, and risk tolerance. 

For instance, the loss of a spouse may not only lead to emotional distress but also impact your income and financial responsibilities, requiring a reassessment of your investment strategy to ensure it aligns with your new circumstances. 

Similarly, marriage, divorce, or the addition of a child can alter your financial picture, merging or dividing assets and liabilities, necessitating adjustments to your portfolio that reflect changes in your life or financial situation.

Neglecting your portfolio during such times can lead to misalignment with your current needs and goals. For example, if you don’t review your portfolio after a job loss, you might miss the need to adjust your investment strategy to a more conservative approach to preserve capital while you’re without a regular income, potentially exposing you to unnecessary risk during a financially vulnerable time. 

Tax Implications

Checking your portfolio regularly becomes even more crucial when your tax situation changes, such as when you retire. For instance, upon retirement, you might transition from earning a regular salary to drawing income from various sources like retirement and other savings accounts.

This shift could place you in a higher tax bracket if these income streams are substantial compared to your pre-retirement earnings. Adjusting your portfolio in response to these changes is key to managing your tax liability more effectively. 

For example, consider strategies like tax-loss harvesting to offset capital gains. Regular reviews allow you to adapt your investment strategy to your current tax situation, ensuring that your retirement savings are optimized for growth, income, and tax efficiency. 

This proactive approach can help you manage your taxes more effectively, potentially saving you significant money over longer periods.

Retirement Risk Zone: Navigating the Critical Years

The years leading up to and immediately after retirement are often called the retirement risk zone. It’s a time when your retirement assets are at their peak, and your investment strategy demands extra attention. 

Rising longevity makes this even more of a necessity. In modern times, you can retire at age 65 and be retired for 30 or more years.

Regularly reviewing your portfolio during your retirement risk zone years, typically the five years before and after retirement is crucial for adapting to market fluctuations and ensuring financial stability. This period is sensitive because significant market downturns can disproportionately impact your retirement savings. By keeping a close eye on your investments, you can make timely adjustments to your asset allocation, reducing exposure to high-risk investments and securing a stable income stream.

For example, let’s say you experience a substantial downturn in the stock market during your initial retirement years. You may want to shift some of your equity investments into more conservative bond holdings or income generating investments like annuities. This proactive approach helps preserve capital during volatile market periods, ensuring your retirement funds are not overly depleted before they have time to recover. 

Watch SGL President Steve Lewit discuss why it’s important to plan for the unexpected.

SGL Financial: Comprehensive Wealth Management Services

If you’re looking for one advisory firm that can provide comprehensive wealth management services in Buffalo Grove, IL, consider the SGL Financial team. Our services go well beyond simple investment advice. We fully integrate financial planning, including retirement planning, tax strategies, estate planning, income planning and more. 

Regular portfolio reviews are a cornerstone of these services, ensuring that every piece of your financial puzzle fits perfectly with your goals and expectations.

You’ll receive our undivided attention, and we’ll treat you with the genuine respect you deserve. As fiduciaries, our core commitment is to always act in your best interest, prioritizing your needs above all else.

Fiduciary is the highest ethical standard in the financial services industry.

We believe in clear, straightforward communication about your options, advantages, and potential drawbacks, empowering you to make informed decisions.

We invite you to connect with us to learn more about our portfolio review services.