The first six months of the year have passed, and the investment landscape continues to be volatile. The days of setting it and forgetting it regarding your portfolio are long over. Many people start a new year with new resolutions and financial goals; as we enter the second half of the year, now is a great time to review your investment portfolio and take steps to rebalance if necessary.
Your financial review is personal and will not be the same as other people’s. However, there are a few key steps that any astute investor can follow to help with their assessment.
• First review the initial plans you made at the start of the year. Have you stuck to your plans? What have you accomplished in the first six months of the year? Did you promise to add funds to an instrument? Did you save what you earmarked for your emergency fund? To go forward you must assess where you’re coming from.
• After this initial assessment, take note of if there have been any major changes to your personal finances. Did you receive an increase in salary? Have you secured a secondary or passive income stream? Not only should you consider inflows but outflows as well. Have you had to make any significant unexpected payments? In the current interest rate environment, many people have seen increases in their mortgage rates or car loans. If your loans were variable rates, how has the additional expense affected your bottom line? Does your portfolio still align with the financial goals you have set?
Having reviewed the more personal aspects of your goals you can now concentrate on the assets in your portfolio. How have they been performing in the volatile times? What is the current market value of the instruments in your portfolio?
The current market conditions have provided opportunities to purchase instruments issued by high credit quality issuers at a discount. Have you added any of those to your portfolio?
Relatively high inflation may be causing the value of your savings to be depleted. Have you considered moving funds to a higher-yielding, more secure instrument?
Another aspect of your portfolio to review is the timeline to maturity or call for your investments. If you have instruments maturing in the latter half of the year, have you begun to review available opportunities? For the investor who needs fixed-income products, you could consider adding instruments that have a medium to long-term maturity. This will allow you to lock in high yields we are seeing in the market versus having to reinvest in the short term where you may be exposed to reinvestment risks when yields are lower.
Reviewing your portfolio throughout the year is an important task every investor should undertake. Checking on your asset allocation and ensure you are still aligned to meet your financial goals is key to a balanced and successful portfolio. As always, seek help from a licensed financial advisor to assist you in your portfolio review.
Christine Rankine is the Manager – Personal Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm
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