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Portfolio Review - What to Expect |
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What to Expect During a Portfolio Review
Regularly reviewing your investment portfolio is a key element of financial success. A review will indicate whether your investment plan is on track, and indicate when adjustments are necessary.
When reviewing your portfolio, work with a professional. A financial advisor can help gauge your progress and show you how to maintain the right mix of investments for your needs and goals.
You and your financial advisor should review your portfolio at least once a year. To make the most of the review, ensure you have all the documentation you require for a thorough analysis of your portfolio and financial needs. This includes the most recent investment statements from all financial institutions, including RRSPs, life insurance policy details, pension information, and details of the worth of your major assets.
Here are some of the things you and a financial advisor should look for when reviewing your portfolio.
Suitability of investments. Your investments must suit your needs. That doesn't necessarily mean you should hold all the best-performing investments or even sell those that under perform over the short term. Long-term progress should be your yardstick, along with factors such as a suitable risk level for your situation and age. This isn't to say that you don't want to know the recent performance history of investments, just that short-term results shouldn't be the determining factor in buy or sell decisions.
Portfolio balance. An investment portfolio should never be static. Adjustments are required in response to changes in life-for example, when you marry or divorce, when a child is born or nears college or university age, as you move closer to retirement. It's a good idea to review holdings periodically to determine whether they're balanced and structured to make progress toward your goals. You also need to ensure your portfolio remains within your risk tolerance.
Tax efficiency. Many of us don't pay sufficient attention to the impact of taxes on investments. A portfolio review is a good time to make sure you take full advantage of investments that offer tax breaks - particularly RRSPs. Because investments grow tax-deferred in an RRSP, make your maximum contribution each year before you invest outside a retirement plan, if you have both an RRSP and non-registered investment portfolio, proper allocation of assets can reduce your tax bill. For example, it may be best to hold interest-generating investments inside an RRSP because interest is fully taxable outside a retirement plan. Investments that are eligible for tax beaks, such as those that generate capital gains or dividends, are good candidates for your non-registered portfolio.
Changes in investment-related laws. Laws and regulations change. An investment professional will keep you up to date on those changes and what they mean.
If you haven't reviewed your portfolio lately, get in touch with your financial advisor. A review is one of the smartest investment moves you can make. |
