Perform a Mid-Year Review of Your Investment Portfolio for Greater Success by Years End

How do investors plan? While nobody can predict the future, investors should know what to expect in terms of uncertainty and seasonal effects affecting the global market over the next six months. Smart investors should perform a semi-annual examination of their holdings to ensure their portfolio is still performing according to your priorities.

So before you kick back for the summer, review and adjust your investment portfolio for maximum performance. Review these strategies for a mid-year investment checkup. Prior to making potential adjustments, speak with your broker or a trusted financial advisor to review the tax implications of each action given your specific financial situation.

The 5 Step Investment Checkup

1. Review Your Current Investment Positions

Gather statements for each of your investment accounts to assess the current state of returns — you may want to create a spreadsheet to synthesize all of your accounts for ease of viewing. Many brokerage firms offer apps for referencing the current state of your portfolio, however, USA Today also offers a free Portfolio Tracker which allows you to see a snapshot of multiple accounts on one, easy to view platform.

You and your advisor will want to ask the following: Are any of your picks significantly underperforming or are there any continuous over performances that may signal red flags? Does your asset mix match your risk tolerance?

2. Revisit Your Investment Objectives

What are your goals for your portfolio? Do you want to have enough money to live on for the rest of your life after you retire? Maybe you want to help a child with college tuition. Whatever the goal, it is important to know what you want out of investing and recognize that those desires may (and do) change over time or suddenly. Any changes in your life or financial situation can cause you to reassess your goals; adjust your investment plan to fit these goals before you buy, sell or trade items in your portfolio.

  • Address Your Asset Allocation and Rebalance Your Portfolio Going into Q3

The most common mid-year investment strategy is to rebalance your portfolio. Regardless of performance, periodic rebalancing — whether every month, six months, or each year — is necessary for reaching your long-term financial goals.

With stocks outperforming bonds lately, many investors heavy into stock may find the risk in their asset mix is already off target. Say you started off with a portfolio with a target of 70% in stocks or equities and 30% in bonds in January, but now you are up to 79% stocks and just 21% bonds due to the market performance. That’s nine percentage points off target and possibly more risk than you want to cope with.

Rebalancing reduces portfolio risk, but there are times when it can also cut into returns. Consider adjusting your asset mix or taking cash off the table with your advisor. In the future, you can automate the process with threshold rebalancing to rebalance when the asset mix deviates from the target by a certain amount, however, you should still bi-annually review your portfolio to ensure targets are being met.

Your asset allocation is how much you hold in stocks, bonds, and cash. You and your advisor will want to compare the portfolio’s current allocation with your liquidity and income needs, risk tolerance and time frame. After comprehensive analysis you may take new positions in other industries to ensure diversification, try fixed income investments to lower risk or elect to invest in money-making equities.

4. Reap Gains and Build Cash Reserves

You don’t want to be a short-term investor, but chances are you are sitting on hefty gains after a continuing bull run in the market. As you adjust your portfolio, consider building some cash reserves. Turning gains into cold, hard cash may allow you to capitalize on new investment opportunities or roll it into savings for a rainy day.

5. Harvest Losses to Cut Your Year End Tax Liability

Want to take some profits off the table by selling winning shares of stocks, funds, or ETFs, but are reluctant to do so for fear of being hit with a huge capital gains bill? Don’t worry too much, because you may be able to offset those gains with losses this year or losses carried forward from last year. Normally, investors harvest losses at the end of the year, however, you may need to act at the mid-term in case some of those losses evaporate.

Put Your Portfolio Back on Track

The market environment changes constantly, which can cause any long-term plan to go off course. Correct any mistakes or rebalance according to targets with a mid-term investment

review. Remember to speak with your financial, legal or tax professional for more information about the topics which interest you for assistance with putting your portfolio back on track for success come December.

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