Why to Consider an End-of-the-Year Portfolio Review

Estimated reading time: 3 minutes

You probably have a list of financial tasks that you’re looking to complete by the end of the year. Getting ready to file your taxes is likely the first thing on the list, followed by making the maximum contributions to your self-directed IRA, and perhaps rolling over your existing IRA with a traditional custodian to a self-directed IRA managed by a custodian such as Quest Trust Company.

Another task that should be part of your end of the year checklist is to conduct a portfolio review. Here are some reasons why a portfolio review can be so valuable.

Evaluate Your Past Investment Decisions

It’s important that you periodically evaluate the past investment decisions you make. Did your investment selection methodology from the past year yield the results you were anticipating? Were your investment decisions more volatile than you believed they’d be? Did your investments generate the level of income you hoped for? Unless you determine whether your prior decisions were good ones, it’s difficult to know whether you should continue on the same path or change course.

To Help With Your Planning for the Coming Year

Depending on your answers to the above questions, you may decide to make minor changes to your investment portfolio, or perhaps make some significant changes if they’re necessary. Or you might decide not to make any changes whatsoever. But it’s difficult to make a reasoned decision for any investment choices unless you first evaluate how your current portfolio is performing. By the same token, if there have been significant changes in your life (such as the birth of a child or getting married), then you may want to change your investment focus to reflect those changes.

Getting an Expert Opinion

When you an annual portfolio review, you can bring in outside assistance to help you evaluate your investment performance and chart a proper path forward. Sometimes getting an expert opinion, even if it’s just once per year, can prove extremely valuable.

Another Step Closer to Retirement

As you get older, your investment needs change. There are different approaches to retirement investment planning, but nearly everyone would agree that the investment needs of a 25 year old investor are going to be different from those of a 65 year old. If you don’t conduct an annual portfolio review it can be difficult to know whether your portfolio composition is appropriate for your age.

Review Retirement and Non-Retirement Accounts

Your end of the year portfolio review should include all of your retirement accounts (i.e., your IRAs and 401(k)s), as well as your taxable investment accounts. You may also wish to include holdings such as your savings accounts, checking accounts and any bank CDs, to make sure that your analysis incorporates an accurate picture of your cash holdings. When you evaluate your overall portfolio across all of your accounts you’ll be in a better position to make investment choices that can help you meet your goals.

Remember that reviewing your portfolio each year doesn’t necessarily mean that you have to select an entirely new set of investments. But conducting that review will help you decide on what changes you might want to make for the next year, or confirm that it’s best to stick with your current investments.