8 Tips for Evaluating Your Portfolio Before Year’s End

24 November 2014

As 2014 draws to a close, many of us are looking at how our investment portfolios have fared. Fortunately, the market has been fairly calm recently, but it’s always useful to have strategies that will help you achieve your goals and weather—both financially and psychologically—the inevitable bumps in the road. Here are eight ways to see where you stand and formulate a plan for the New Year.

1. Have a game plan for 2015.

What’s important is not just having any game plan, but having a game plan that fits you. Everybody’s situation is different. Work with a professional advisor to develop a plan that takes into account your income, savings, risk tolerance, earning capacity and other personal factors.

2. Know what you own and why.

When the market goes off the tracks, knowing why you originally made a specific investment can help you evaluate whether your reasons still hold, regardless of what the overall market is doing. Understanding how a specific holding fits in your portfolio can also help you consider whether a lower price might actually represent a buying opportunity. If you don’t understand why a security is in your portfolio, call your investment advisor and find out. That knowledge can be particularly important when the market goes south, especially if you’re considering replacing your current holding with another investment.

If you’ve got a well-diversified portfolio that includes multiple asset classes, it could be useful to compare its overall performance to relevant benchmarks. If you find that your investments are performing in line with those benchmarks, you might feel better about your overall strategy.

Even a diversified portfolio is no guarantee that you won’t suffer losses, of course. But diversification means that when the S&P 500 drops 10% or 20%, your overall portfolio won’t necessarily drop by the same amount.

3. Remind yourself that the financial markets are cyclical, and be willing to learn from your mistakes.

Even if you wish you had sold at what turned out to be a market peak, or regret having sat out a buying opportunity, you may well get another chance at some point. A good game plan with well-thought-out asset allocation is still the basis of good investment planning.

So if a choice you made earlier in the year now seems rash, sometimes the best strategy is to take a tax loss, learn from the experience, and apply the lesson to future decisions. A financial expert can prepare you and your portfolio to handle—and take advantage of—the market’s ups and downs.

4. Consider playing defense.

During volatile periods in the stock market, many investors reexamine their allocation to such defensive sectors as consumer staples or utilities (though like all stocks, those sectors involve their own risks, and are not necessarily immune from overall market movements). Dividends also can help cushion the impact of price swings. According to Standard and Poor’s, dividend income has represented roughly one-third of the monthly total return on the S&P 500 since 1926, ranging from a high of 53% during the 1940s to a low of 14% in the 1990s, when investors focused on growth.

5. Stay on course by continuing to save.

At 5.6%, the U.S. personal savings rate is abysmal. We’re not just a “delayed-gratification” nation: We’re an “I-want-it-now” nation. Yet as Thomas Stanley outlines in The Millionaire Next Door, most of the truly wealthy people in this country live below their means, and save.

One of the best ways to save is by contributing as much as you can to retirement accounts. Even if the value of your holdings fluctuates, regularly adding to an account designed for a long-term goal may cushion the emotional impact of market swings.

6. Use cash to help manage your mind set.

Keeping a cash reserve can give you confidence and peace of mind. It also enhances your ability to make thoughtful decisions instead of impulsive ones—and to take advantage of good opportunities as they arise. If you’ve established an appropriate asset allocation, you shouldn’t have to sell stocks to meet ordinary expenses or—if you’ve used leverage—a margin call. (As a rule, you should always have enough cash for at least 90 days of living expenses.)

7. Look in the rear-view mirror, but remember your road map.

If you’re investing for the long term, take a look back and see how far you’ve come. If your portfolio is down this year, it can be easy to forget any progress you may already have made. Instead, ask yourself, “What did I get done? What has gone well?”

Past performance is no guarantee of future returns, but the stock market’s long-term direction has historically been up. With stocks, it’s important to remember that having an investing strategy is only half the battle; the other half is being able to stick to it.

8. Take it easy—if you feel you need to make changes in your portfolio, talk to a trusted advisor before you make any big decisions.

He or she can help you take incremental actions. You could test the waters by redirecting a small percentage of one asset class into another. You could put any new money into investments you feel are well positioned for the future, but leave the rest as is. You could set a stop-loss order to prevent an investment from falling below a certain level. Even if you want to adjust your portfolio during a period of turmoil, those changes can and probably should happen in gradual steps—and with the advice of a professional.

The most helpful step of all? Call on us.

The bottom line is that when it comes to investing, there’s no one-size-fits-all solution. Rigby Financial Group offers extensive services in the areas of personal financial planning and tax planning. Please contact us for advice regarding any changes you’re thinking about making to your investment plan for 2015.


The information presented here is not specific to any individual’s personal circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.