Personal Annual Financial Review Part 3: Investments

Next it is time to have a look at your investments and retirement savings. This part will determine that you have invested your money correctly and are on track to reach your goals. It will cover asset allocation, retirement accounts, and taxable investments.

Asset Allocation:

• The first step is to evaluate your current target asset allocation. Is it performing as you expected? Are you able to tolerate the ups and downs in your portfolio?
• Based on the above questions you can make adjustments to your target asset allocation if needed. Example: Current: 80% stocks, 20% bonds. New Target: 70% stocks, 30% bonds.
• Once you have determined the correct target allocation it is time to re-balance your portfolio. If you have new or idle cash to invest use it first. Once that runs out do a Sell/Buy to bring it back to the target allocation if needed. Using cash first reduces transaction costs!
  

Retirement Accounts:

• Fees: Have a look at any fees you were charged over the past year. Is their any way to reduce or eliminate them? This includes changing brokers to a discount one such as Firstrade.
• Contributions: Are the amounts you deposit each month / quarter / year correct? Do you need to contribute more? Are you getting your full employer's match, if any?
• Tax Status: Does it make sense to switch to a Roth IRA from a Traditional or vice-versa? ( See Part 4 next week for more in depth tax information)
• Progress: Are you in line to meet your retirement target?
  

Taxable Investments:

• Fees: Have a look at any fees you were charged over the past year. Is their any way to reduce or eliminate them? This includes changing brokers to a discount one such as Firstrade.
• Shifting Assets: Are you maxing out your IRA contributions each year? If not, use assets from this account to fill the gap so you can get the tax benefits.
• Check your 1099 tax statements versus your actual activity to be sure it is accurate!

A yearly (minimum) review of your investments makes sure that you stay in line to meet your goals by maintaining your target asset allocation. Re-balancing forces you to sell high and buy low. Keeping an eye on account fees and knowing your options prevents wasting money and time. Tune in next week for Part 4: Taxes!