Does Your Investment Portfolio Need A Tune-Up?

 

 

Studies have shown that a poorly tuned car can waste up to fifteen percent of the gas that it burns. So it’s important to do things like clean or replace dirty spark plugs, change the oil and filter, and check the timing regularly.  Some simple maintenance is all it takes to keep your car from being a real gas-guzzler.  The same holds true with your Investment Portfolio.  

 

Here are a few items to take a look at:

 

Rebalancing.   Your investment goals and risk tolerance are key factors in determining your investment mix.  Some of us are focused on generating income from our savings while others are concerned with growth.  A good year in the stock market can shift our percentage of equity investments from an amount your comfortable with to an amount that is way out of line with your appetite for risk. If this is the case for you, consider taking some of your gains off the table.  Allocating some of your gains back over your fixed income investments can help to reset your overall investment mix back to its original weightings.

 

Review withdrawal rate.  Your withdrawal rate is the percentage amount that you are taking as a supplemental income from your investments.  I typically don’t advise that anyone try to take more than a four percent annual withdrawal. It’s important to review this rate at least annually.   This is because the economy and our personal expenses change overtime.  As investments go up and down and interest and inflation rates change, we need to adapt.  For example, if you haven’t changed the amount your taking from your investments in a number of years you may feel squeezed because inflation has made everything more expensive.  If this is the case review your investments to see if your portfolio has grown to support a larger withdrawal amount.  If your portfolio value is larger you may be able to take a larger dollar withdrawal while maintaining your original percentage rate of withdrawal. 

 

Review beneficiary information.  I can’t stress enough how important it is to review beneficiary information with respect to an Individual Retirement Account (IRA).  If you have lost a loved one since you’ve opened your IRA I urge you to get in touch with your IRA provider right away.   If you don’t have the proper people listed as primary and contingent beneficiaries your heirs can miss out on very large tax savings such as those that a Stretch IRA may provide.  Also it’s important to note on your beneficiary forms whether you desire conditional designations like Per Stirpes or Per Capita. 

 

Much like your car, consistent regular tune-ups can keep your Investment Portfolio performing well and not like a gas-guzzler.

 

 

 

Jon Flynn is a Certified Financial Planner ^TM and owner of Flynn Financial in Eynon. He is a Representative of Securities America, Inc., Member FINRA/SIPC and of Securities America Advisors, Inc. Flynn Financial and Securities America are unaffiliated.   Mr. Flynn can be reached at 570-876-5015.