The Importance of Portfolio Reviews
It can be said that the hallmark of great Financial Advisors is the efficiency and efficacy of their Portfolio Review process. We live in a dynamic era, in which reality is evolving on an almost continuous basis. In such a scenario where today’s reality may be markedly different from yesterdays, the convenient “SIP it, shut it, forget it” philosophy may not hold its ground too well. It becomes critical to revisit your investment portfolio at least once a year, or if high-impact economic events take place, to make sure everything is still in sync. Here are five key objectives that conflict-free Financial Advisors aim to achieve during a periodic Portfolio Review.
1.To weed out parasites
By parasites, I mean the investments which are not performing for quite some time now. They are parasites because they are feeding on the money you invested in them and are of no productive use. It is very important to review your portfolio and rule out such parasites which not only degrade your returns but also make you miss out on opportunities which otherwise could have been tried for with that money. It would need corrective measures to be taken and some almost idle savings waiting to be invested in the right place to create wealth.
2.To invest the idle money
Now that you have weeded out the non-performers from your portfolio, this brings us with some money, let us say a considerable amount of money, to be invested in right financial instruments which are actually performing in the current market scenario. Do not let your money sit idle, be it savings account or money freed from your investment portfolio, put it back to work to create wealth for you. If you are skeptical about the market corrections, try out avenues with low risk. Depending on your liquidity needs and risk profile, you can choose your instrument.
3.Taxes
If you are well-versed with the investments you have made and know their tax benefits, they will come handy to you while your file your taxes and income tax return. If saving taxes comes early on your financial plan, you need to select only or most of those investments which offer tax benefits. It will also give you an idea where more you can invest to save maximum on taxes.
Hence, it is crucial to successful investing that you review your investment portfolio at least on a yearly basis. This will not only help you to keep up with the market trends and movements but also help you to locate and rectify any mistakes you have made by an impulsive action.