What to Include in Your Annual Portfolio Review

Between high levels of market volatility, rising interest rates, and a looming recession, this year’s portfolio review might become more about protecting assets than maximizing gains. As you measure success and look for ways to mitigate risk, here are a few critical areas to consider:

Performance: What’s Working and What’s Not

Any review begins with a performance check. An analysis of which positions outperformed expectations and what changes should be made based on the future economic outlook. Bull and bear markets require different strategies and may warrant portfolio adjustments.
It can be painful to unload a stock or mutual fund at a loss, but doing so could prevent further declines. Likewise, selling a position that beat your expectations in the past few years could feel like you are forfeiting future gains. However, if it is unlikely to perform well in a bear market, it could be the right move.

Does The Investment Mix Align With Your Goals?

Diversification, risk tolerance, and long-term goals determine the right portfolio mix.

Diversification can lower risk and volatility by spreading investments across various asset classes. A diversification and risk review often focuses on traditional market investments. A complete picture includes alternative investments like real estate, cryptocurrency, or business opportunities.

Long-term goals and risk tolerance play a significant role in choosing the best diversification mix. If you are nearing retirement, cash flow and lower volatility may be priorities where a longer time horizon could warrant more aggressive strategies with less liquidity.
With the past year’s rapidly changing economic conditions and high volatility, it may be time to adjust your portfolio. Verify that your holdings still align with both short and long-term goals through the lens of diversification and risk in relation to the returns delivered.

Is Your Investment Strategy On Track

After a year of record inflation, you may be second-guessing the amount you need for a comfortable retirement. Even if inflation gets under control, a deep recession could upend your long-term plans if you don’t amp up balances.

Retiring with more invested assets could mean putting more money away or discovering ways to make your investment dollars work harder. Other alternatives include adjusting projected retirement dates or scaling back expectations.

Have You Adjusted Your Portfolio for Inflation Risk

The average inflation over the past three decades was only 2.24 percent, which produced a false sense of security. Record levels of inflation in 2021 and 2022 reminded everyone that inflation could quickly devalue a portfolio. Mitigating inflation risk means choosing investments that tend to grow faster than the inflation rate and ensuring your diversification strategy considers how each position responds to inflationary periods.

Employing Tax-Saving Strategies

Not all investments utilize tax-efficient strategies. As more investors rely on passive mutual funds, there can be less focus on tax efficiency. Even a slight increase in taxation can create a drag on your portfolio. Adding real estate investments to your portfolio can add tax benefits not found in stocks and mutual funds and could improve the tax efficiency of your portfolio.

Real estate syndications can add diversification, reduce volatility, increase your return rate, serve as a hedge against inflation, and improve the tax efficiency of your portfolio. If you are interested in learning more about investing in commercial real estate syndications, we created a short introductory video.

Enter your info below to get a free ebook copy of the "Bringing Value, Solving Problems and Leaving a Legacy"