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5 Good Times to Check in on Your Portfolio

July 21, 2015
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By Stephen Hart

Learn more about Stephen on NerdWallet’s Ask an Advisor

Financial advisors see client behavior that is all over the map. Some clients take a peek at their accounts every morning while the coffee is brewing. Others merely glance at their quarterly statements. Still others don’t check in at all; they see their accounts only during annual reviews.

So, how often should you review your portfolio? While your inclinations may fall anywhere on the spectrum from “way too often” to “not nearly often enough,” there are certainly some times when you should absolutely be going over your accounts, reviewing your strategy and progress toward your goals, and double-checking whether you need to rebalance or make other changes. Here are five of the most important times:

1. As part of a regular review process

If you’re working with a financial advisor, ask how often you should touch base. Keep in mind that most portfolios don’t require constant rebalancing or adjustment, so if your investment goals haven’t changed, it’s more than likely that your portfolio won’t need to, either. Your advisor will monitor your account to make sure it is in balance. If you review performance numbers, you should realize that comparing annual performance against a benchmark is using a statistically meaningless time period. Performance should be evaluated over much longer periods in order to provide meaningful analysis of risk-adjusted return. In fact, if you’re not investing with a significant time horizon (at least five to 10 years), it may be best not to invest at all. Markets go up and down over short periods of time; it’s those who stick it out for the long term, with minor tweaks along the way, who fare the best.

2. Around a major life event

Did you get married or divorced? Just have a baby? Perhaps you bought a new house. Any major life event should be a reason to take a step back and look at how (and why) your money is invested.

3. With a change in employment

This almost goes into No. 2 as a life event, but it’s important to break out as a separate item, because “change in employment” can mean many things: a completely new job at a new workplace, a promotion, a spouse or family member leaving or joining the workforce. Make sure to look at how this affects your savings rate, when you think you’ll retire and what employer benefits you’ll gain or lose because of the change.

4. After a large cash inflow or outflow

Maybe you’ve received an inheritance or a big bonus at work. Maybe you won the lottery! Any large cash inflow can change how you should be invested. And don’t forget outflows, since you may need to tap into your investments before retirement or achieving your goal. Whenever a lot of money goes into or out of your portfolio, review your goals and ensure your investments are still in line with your risk tolerance and time horizon.

5. When you create or update your comprehensive financial plan

Financial plans are a game-changer for most investors. While you or your advisor can invest your money with a general goal in mind, a comprehensive financial plan will take into account all your assets, all your liabilities and all your goals. A financial planner will then recommend how to invest your money based on all your information. Once created, most plans are updated anywhere from once a year up to every three to five years.

Keep in mind that these are simply the times you should look at your portfolio; that doesn’t mean you must take action. A major factor in success over the long haul is sticking to the plan you initially set. Those who invest on emotion and react to short-term events tend to buy high and sell low, the exact opposite of a successful strategy. Find an advisor who helps keep you accountable to these milestones, and you’ll be well on your way to financial security and peace of mind.

Image via iStock.

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