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Global markets seem to have taken up shop at an amusement park with thrilling roller coaster rides. The regular ups, downs and loop de loops caused by political or economic incidents are more the norm than the exception these days.
It’s very easy for investors to panic and want to check their portfolio to see which fund shows returns or is running a loss.
Chat with your financial advisor if you are nervous or concerned about your investments, asset classes, fund performance or returns.
What is a Financial Review?
A financial review is when investors consult with a wealth advisor to look over their financial portfolio to see if it is performing, to make any adjustments according to market conditions and their situation, to check if their risk profile is still the same, and to see whether they are still on track with their financial goals.
Why Have a Financial Portfolio Review?
Because life is unpredictable, and situations change in our personal lives and globally. Your portfolio needs to adapt to the changing financial landscape. Regular maintenance is necessary for anything to function optimally, e.g. regular vehicle maintenance keeps it performing at an optimum level. A review helps identify any issues that your portfolio might have or could develop in the future.
Funds Fitness check
Are your investments healthy? Some of your funds might not be performing so well. Your advisor analyses how funds are performing and decides if they are still in line with your financial goals. Over the last year, there might be new funds that suit your investment needs better. They will check if your investments are still tax efficient, as you may have moved abroad or tax laws have changed.
Your circumstances may have changed, and you might want to invest more money or make more significant contributions towards retirement savings and wealth building, e.g. you got a promotion, and your income is higher, you received a large bonus or an inheritance, or perhaps you got married and wished to increase your retirement contributions to cover two retirees instead of one.
Rebalancing
As markets change over time, certain asset classes or sectors perform better than others. This may change the weighting of your risk profile. Rebalancing entails bringing funds back into balance, e.g. your portfolio follows a balanced risk profile with an equal allocation. Over the last year, your equities or stocks have performed well and given good returns. This will increase the number of equities in your portfolio. Because equities are a higher-risk investment, the increased equity returns have pushed your balance portfolio into a more aggressive and riskier risk class. Your advisor then sells off some of the equities and buys more bonds to regain the correct ratio and back to a balanced risk profile.
The higher the equity weighting or allocation, the higher the risk. Equities have a history of producing higher returns but are also riskier.
Also, as you get closer to retirement, your wealth consultant will help shift your portfolio from a wealth-building risk profile to a wealth-preservation risk profile. This means reducing the higher-risk investments and adding more conservative funds to reduce volatility.
When Should You Review Your Portfolio?
It is important to have a major annual review with quarterly or bi-annual check-ups depending on the complexity of your portfolio. But there are also other times that circumstances might affect your portfolio and needs a review.
- When markets go wild – When there are significant shifts in the markets in any direction, it’s best to see your financial advisor to see how it will affect your portfolio and future planning.
- When tax laws change – Changing tax laws and regulations can affect the effectiveness of your portfolio’s structure. Your advisor might have to shift your investments into more tax-efficient jurisdictions or use more tax-efficient vehicles.
- When your finances change – If your financial circumstances change, you must review your portfolio. Your income might have increased; you might have received a large bonus, inherited money, started a business, or even upgraded your lifestyle.
- When you change countries – Moving to another country may affect your portfolio. Country finance regulations differ, and you might need to move your portfolio into a different jurisdiction or restructure it so it is compliant.
Danger: Over checking your portfolio can lead to panic and irrational decisions. Volatility is short-term. Investments are long-term commitments and will ride the ups and downs in the market. Keep the end goal in sight.
What is Covered in a Review?
A review aims to take stock of your financial portfolio and circumstances and make any necessary changes or additions. Aspects that are covered in a review include:
- Budgeting and managing your debt – Ensuring that any debt is managed efficiently and that you have a payment plan. Creating a comprehensive budget for your finances is essential to determine affordability and start saving.
- Wealth management – Establishing a comprehensive wealth-building plan, including saving, investing and retirement planning.
- Managing your risk – Asking the right questions to determine your correct risk profile and asset class balance.
- Tax planning – Ensuring that your global portfolio is structured as tax efficiently as possible.
- Estate planning – Leaving your legacy behind requires structured planning of your estate, including will drafting, beneficiaries and estate or inheritance tax planning.
deVere Core portfolio tracker is an app designed exclusively for deVere clients to track and monitor their portfolio 24/7. This includes cash movement, transactions, premiums payments and potential future offers.
Having regular reviews is vital for the financial health of your portfolio.
Please note the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.
