Reviewing your investments

© 2017-Aptos Life

As we are writing this month’s article, the Dow Jones Industrial Average just crossed over 22,000 for the first time in history (Aug. 2, 2017). Year to date the Dow Jones Industrial Average is up approximately 11.4 percent while the S & P 500 is up approximately 10.61 percent (as of Aug. 1, Source: Morningstar). With markets sitting at all-time highs, it can lead to questions about whether you are over/under allocated in stocks or if your current investment portfolio is still aligned with your long term goals and objectives. Below are some reasons to re-examine your current investments and potentially make changes as necessary.

Reason #1 - Rebalance

The stock market has had quite a run in the nine months or so since the end of 2016. It might be a good time to review your overall asset allocation. For simplicity, let’s assume that you’ve determined that your portfolio should consist of 60 percent stocks and 40 percent bonds. Since the market has had a run up, it’s possible that your portfolio is now overweight in stocks and underweight in bonds, which may no longer align with your overall risk tolerance. You might consider “trimming the trees” and rebalancing your portfolio to bring it back in line with your stated allocation of 60 percent stocks and 40 percent bonds. However, before you do anything, make sure you understand any tax implications that may come from selling positions in your portfolio and any costs involved. For example, if your portfolio consists of a taxable account, rebalancing may cause you to incur capital gains or losses. Coordinate with a tax professional to understand your situation.

Reason #2 – You’ve Had A Life Event Change

Goals, both short term and long term can change over time. It’s important to periodically check to make sure your portfolio matches your current goals, time horizon, and tolerance for risk. For example, let’s say you have been saving for a down payment on a home that you would like to purchase in the next 3-5 years. However, you’ve been investing the money you’ve been saving in an aggressive stock or stock fund. We would say, you probably should re-evaluate that investment because it doesn’t align with your stated goal and time horizon. A less extreme example would be to adjust your portfolio as you approach retirement. Younger workers typically have more time to allow their retirement portfolios to grow and weather short term volatility. As workers age, they can examine their portfolios and make necessary adjustments that align with their time frame to retire and their appetite for risk. A qualified professional can help quantify qualitative goals like wanting to retire in the future.

Reason #3 – Something is Not Working

Let’s face it, sometime things just don’t go the way you expect them to. It could be the category of what you are invested in or just the choice you have picked to fill that category. It could be that something has changed from when you made your original choice and your original pick is not performing well compared to other options that may be available. You should always consider the time you have held the current investment as well as the tax and transaction cost of making a change. If you are considering an alternative be sure to evaluate it after taking this into consideration.

During times like we have been experiencing in the stock markets over the last six months and over the last year it is easy to become complacent and lose perspective. We believe this is one of the greatest dangers in this market right now. It is human nature to get excited about the good news, just as it is easy to overreact to bad news. We do not advocate trying to “time” the markets, and encourage individuals to maintain clear objectives and maintain proper allocation and diversification after considering your personal objectives in light of your time frame and tolerance for risk.

Remember that even prudent diversification and reasonable asset allocation will not ensure a profit or protect against a loss. However, it may spread your risk so that investments that do poorly may be balanced by others that do relatively better. It just makes good common sense to keep this in mind and review your investments on a regular basis.

Gary E. Croxall, CFP®

Soren E. Croxall, CFP®

Croxall Capital Planning

Advisory services provided by Croxall Capital Planning (CCP), a Registered Investment Advisor. Separate advisory and securities services may be provided by National Planning Corporation (NPC), member FINRA/SIPC, and a SEC Registered Investment Advisor. CCP & NPC are independent and unrelated companies. Please consult with your representative to confirm on which company’s behalf services are being provided. NPC and CCP do not provide tax or legal advice. The information contained herein is for general education and is not intended as specific advice or a recommendation to any person or entity.  The opinions expressed in this article do not necessarily reflect those of NPC. Indices are unmanaged measures of market conditions. It is not possible to invest directly into an index. Past performance is not a guarantee of future results. Examples used as illustration only. Investment decisions should be based on individual’s goals, time horizon, and tolerance for risk.