Lucas Bucl

An investment portfolio is a vehicle to help you achieve your financial goals. Like a car that takes you to your target destination, an investment portfolio requires some occasional maintenance to operate properly and run efficiently. It is easy to put off and ultimately forget to do this routine maintenance. However, neglecting the upkeep can cost you in the long run, and ultimately decrease the chances you will get where you want to go.

A portfolio tune-up doesn’t have to be exhaustive or painful. Tinkering with it too much can also be costly and hurt your results.

Important Maintenance Activities for An Investment Portfolio
  • Review your overall investment strategy:  This should be done every few years or after major life events. When you buy a car, you think about how it will meet your lifestyle needs. As life changes, your needs from the vehicle may change as well. When a family starts having kids, the sporty coupe probably doesn’t accommodate car seats and strollers. That’s the time to consider a change. An investment portfolio works the same way. The overall strategy should be defined at the outset, and only reviewed/changed periodically as goals or life changes.
  • Rebalance the portfolio:  Over time, especially after volatile periods, an investment allocation can get out of alignment. A big market swing can be like hitting a curb and knocking your steering out of alignment. A trip to the mechanic to get everything lined back up is needed. Realigning your investment percentages to the proper specifications works the same way and can help improve performance and manage investment risk.
  • Invest excess cash:  Investment accounts tend to build up excess and uninvested cash over time. This often comes from investment income or regular deposits. Investing this extra cash every few months is like checking the oil and tire pressure on your car. It’s quick and easy maintenance that can help make sure you are getting the most out of your vehicle.
More Considerations:

Review your investment holdings:  Looking at the performance and makeup of your investments on a periodic basis is an important piece of portfolio management. For long-term investors, it is not wise to do this too frequently, as it can lead to chasing winners and poor timing decisions. Think about doing this every year or two, like changing the brakes or battery in your car. It’s not something that should be done all the time but it’s important to do periodically.

Year-end tax planning:  The last couple of months of the year are a great time to look for tax planning opportunities with your investment portfolio. View this like getting your car ready for a holiday road trip. Look for tax loss harvesting opportunities and swap out of investments that are down if you can write off the losses on your taxes. Additionally, making sure you have fully funded your retirement and health savings accounts to maximize tax-advantaged savings puts you in a good position as you roll into the end of the year.

Periodically reviewing and maintaining your investment portfolio is important, just like proper car maintenance. Building routine habits and regularly scheduling these activities is important to keeping your financial goals on track and avoiding costly repairs.

If you struggle to do this yourself, hiring a qualified financial professional to outsource this activity is something to consider. Two organizations that have search tools to find a local planner are the Financial Planning Association and the CFP Board.

Read the article n The KC Star.

Lucas Bucl is a CERTIFIED FINANCIAL PLANNER professional at Aspyre Wealth Partners and a regular contributor to The Kansas City Star.  He helps clients define success and live well today while planning for their future.