The benefits of spring cleaning can extend beyond your home. Your investment portfolio needs regular maintenance to maximize its performance.
A good habit is to regularly review your investment portfolio throughout the year to make sure it aligns with your financial needs.
6 ways to spring clean your portfolio
1. Review your financial goals
Life events like finding a new job or starting a family can impact your financial goals and situation. It can change what you and your family would like to achieve in a year, five or ten years.
A review can also help you understand if you’re on track to achieve your goals or if adjustments are needed, such as saving more money or changing investment products.
If you’re working with a financial advisor, remember to keep them updated so they can make suitable recommendations for you.
2. Adjust your asset allocation
Your portfolio’s asset allocation will change as individual investments, like stocks and bonds, increase or decrease in value over time. The result is that certain investments or asset classes may become under- or over-represented in your portfolio and may not support your long-term financial goals. It could also change your portfolio’s risk profile.
Rebalancing adjusts your asset allocation to bring it back in line with your financial goals and risk tolerance. It typically involves either selling some investments to buy others or adding more funds to restore your original asset mix ratio.
3. Reinvest interest and dividends
You may have accumulated cash in your portfolio from interest or dividends earned during the year. You can benefit from compound growth the sooner you reinvest. Over time, it could significantly improve the value of your portfolio.
Some financial institutions offer accounts with a dividend reinvestment plan (DRIP) which will automatically reinvest your dividends in more shares of the company’s stock.
4. Organize your account statements
Keep your account statements including trade confirmations and tax slips in one place. Good recordkeeping helps you to easily find the information you need, especially if you’re transferring your investments to another firm or preparing your taxes. You can request your financial institution to reissue statements within a certain period, but it can be costly and time consuming.
5. Check your transactions
Report any errors or suspicious activity in your portfolio immediately and ask questions about items you don’t understand.
6. Compare products and services
Every investment has a cost, and you pay fees directly or indirectly. It can have a significant impact on the value of your portfolio over time. You should understand the types of fees you pay and the services that you’re receiving in exchange for them.
You can shop around to get the best value for your money. In addition to fees, consider the level of customer service and types of services you may require.
Use the Portfolio Benchmark Calculator to see how your portfolio compares to a hypothetical portfolio using common benchmarks.