Building wealth and achieving your financial goals start and end with cash flow. You can only do 3 things with money – spend it, save it, or give it away. Your ability to build wealth and reach your goals is largely a matter of spending less than you earn and prioritising saving and investing.
Do the goals, time horizon, and objectives of your investment portfolio need to be reviewed, updated, or documented?
If so, consider the following:
■ If you are funding a planned major purchase or expenditure, review your timeframe and liquidity needs.
■ If you intend to transfer an account to future generations, ensure that it is managed and titled properly, and addressed in your estate plan.
Do you need to assess or review your risk tolerance?
If so, consider your resources, earning capacity, philosophy, phase of life, and personal financial goals. Also weigh your capacity and need for risk.
Do you need to determine if you are on track to meet your goal(s)? If so, consider the following:
■ Ensure that your expected returns (growth and income) are reasonable.
■ Apply appropriate tax and inflation adjustments.
■ Review your retirement and life expectancy projections.
If you are taking distributions, have the spending and distribution rates been reviewed?
Do you need to review performance measurement methods?
Do you have assets outside of your portfolio and/or future sources of income (e.g., pension. Social Security, annuity)?
If so, consider how these resources affect your risk tolerance. A reliable lifetime income stream, from outside of your portfolio, could offset portfolio risk.
Does your aggregate asset allocation need to be reviewed?
If so, consider reviewing your portfolio as a whole to help identify/ avoid concentrations etc.
Do the investment selection criteria need to be reviewed and updated?
If so, consider the investment philosophy and expense ratios for each investment, and the trading activity within each account.
Do the investment monitoring criteria need to be reviewed and updated?
If so, consider the performance relative to peers and any changes to the investment manager team.
If you rebalance your portfolio, does the rebalance plan need to be reviewed?
If so, consider whether this should be done periodically, or when allocations drift from their targets by a predetermined amount.
Do you have tax-exempt, tax-deferred, and taxable investment accounts?
If so, consider choosing asset location to maximise returns (e.g., hold tax-efficient assets in taxable accounts, hold income-producing assets or assets distributing large capital gains in tax-efficient accounts).
Are you taking or planning to take distributions from the account(s)?
If so, consider your allocation to cash, and strategies to raise cash.
Do you have any significant positions that represent a large portion of your portfolio (such as company stock)?
If so, you may be subject to concentration risk.
Do you have any investments you want to own or exclude from your portfolio?
If so, note your instructions and rationale(e.g., legacy, professional, tax considerations). If you would like to align your investing with ethical considerations, explore socially responsible investing (SRI), environmental, social, and governance (ESG), and impact investing strategies.
Do you need to open a new account specifically tied to an investment objective, or consolidate existing accounts?
If so, consider the following:
■ Take advantage of any tax-preferred accounts that align with your goals.
■ When rolling over retirement accounts, be mindful of the impact and applicable rules.
Do you have a taxable account and are you funding your current cash flow needs?
If so, consider tax-efficient income generation and distribution strategies.
Are you trying to minimise your tax liability? If so, consider the following:
■ You may wish to limit trading within your taxable accounts, to control gain realisation (to the extent possible). Long-term gains are preferable to short-term gains, but still increase your total income and can affect your eligibility for miscellaneous exemptions, deductions, and credits, and other income-related preferences and adjustments.
■ If you own mutual funds or interests in REITs or MLPs, be prepared for unique tax consequences.
- Is there a plan in place during periods of market decline?
- Do you need help understanding investment fees and charges (including management, transactional, sales loads, commissions, etc.)?
- Do you need to assess how future contributions will be handled?
- Do/did you participate in any employer stock plans? If so, monitor your rights to shares, their tax treatment, and the percentage of your overall portfolio that consists of employer stock, mitigating any concentration.
- Does the frequency of any account reviews and monitoring need to be updated?
- Do the roles and responsibilities of interested parties, professionals, financial advisors, or others involved need to be reviewed?