Good or poor performance of one or more components of your portfolio can provide a drastic change in the allocation of your assets and create dangerous imbalances that result in inadvertent risk-taking. As a result, your financial advisor will recommend regular checkups. Don’t wait for spring; why not do it now?
The first step your financial advisor will take is to evaluate your portfolio. Do your actual investments match up to your target investments? If they do, your portfolio is in good shape. But if they’re off, your financial advisor will want to determine how far off they are. He or she might not recommend altering your asset mix unless the discrepancy is significant, but every situation differs.
If your portfolio is seriously off balance, your financial advisor may rebalance it. After all, the ultimate goal is to keep your portfolio’s overall risk level under control. To do that, he or she may shift funds out of the asset class that exceeds its target into other investments, add funds to the asset class that falls below its target percentage, or direct dividends from the asset class that exceeds its target into the ones that are below their targets.
Your advisor may also want to determine if the investments in each asset class are still appropriate. That doesn’t mean he or she will recommend selling poorly performing investments and adding investments that may deliver better performance; they may be doing just fine for the type of investments they are.