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Give Your Portfolio a Checkup

As we close out 2020, it’s time to get organized and assess your investments after a very volatile year. You want to start 2021 off right by taking stock of your goals, objectives and risk tolerance.   A year like no other may have shifted your financial plan, prompted a need to retire later, a desire to move your retirement timeline up, or maybe you just learned something new about your risk tolerance level. 

In the next few weeks, you’ll start collecting your statements and organizing your financial information to provide to your tax preparer.  Take this time to consider any financial housekeeping that might be appropriate.  Are there retirement accounts to consolidate, do you have cash spread out everywhere, are your accounts set up for the targeted objective?  

"Am I investing the right way for my situation?" It's a source of anxiety or confusion for many investors in the best of times. After a chaotic year like 2020, how do you know? 

Here are 6 ways to make sure you’re on track. If you are already working with Sandy Cove Advisors, rest assured we are monitoring steps 3-5 on a regular basis.  

1: Evaluate your goals

The purpose of a portfolio checkup is to make sure your investments are still in line with your goals, investment horizon, financial situation, and risk tolerance. If they are, great; if not, it’s time to make adjustments. Or, maybe you are not sure and have never gone through a financial planning exercise.  That's why it is critical that you start with a plan that includes clear goals.


  • Review or create your plan If you are still saving toward your goals, you can make plans about strategic ways to put your money to work. If you are living off your investment portfolio, you can evaluate the income potential of your holdings, or which investments you may need to sell to meet your income needs. You may want to direct new investments to the most attractive securities or funds in underrepresented asset classes.
  • Set a date for your next portfolio review within 1 year, or as soon as 1 month. A regularly scheduled portfolio review can keep your finances on track as you work toward your goals.

 2:  Excess cash on the sidelines

The stock market volatility may have scared you earlier this year from investing in the markets, but if you pulled money out of the market, make sure not to leave it there. Keeping your money on the sidelines could really hurt your returns — if you missed out on the market’s top 10 days over the last two decades, your overall return was reduced by more than 50%, according to J.P. Morgan Asset Management’s 2020 guide to retirement.  Look at all your cash balances across all accounts.

We recommend to keep only enough in cash to cover your emergency fund and your short-term goals, especially where interest rates are so low.  Short-term goals include expenses that could come in the next year or so, like a child’s wedding you are helping pay for. But if you’re going to buy a vacation home in four years, or retire in 15, stay invested, as you have the time to ride the market’s ups and downs.

3: Evaluate your asset mix

After a roller coaster year like 2020, your commitment to your investment mix may have been tested by several sharp market drops and rebounds. Year-end is a good time to check if your investment mix still lines up with your risk tolerance, time frame, and goals. 

At Sandy Cove Advisors, we monitor our clients’ current asset allocation against their target asset allocation, rebalancing portfolios when needed. 

A diversified portfolio is made up of different types of investments with varying patterns of risk and return—like stocks, bonds, and short-term investments. If one part of your investment is declining, another part may be doing well, or at least not going down as much. The goal of diversification is not necessarily to maximize performance, but it may help limit the losses for the level of risk in your portfolio if the markets decline.

Keep in mind the risks associated with the different types of holdings, and remember that just creating a diverse mix isn't enough. Part of the monitoring process needs to make sure that your individual investments remain in line with your plan and to adjust them as necessary. For instance, a small-cap portfolio can grow to become mid-cap, or a period of high returns in one region of the world can leave you over-exposed to the fortunes of that part of the market. That's why it is important to keep careful tabs on how your mix changes over time.


  • Review your investment strategy. Revisit your overall investment mix in light of any changes in your situation and make adjustments if you think they are necessary. We refer to this as rebalancing.
  • Target areas to rebalance. There are a number of ways to rebalance. If your allocation to any asset class has drifted away from your target, you may want to act to get it back into balance. A drift of 10% from your target allocation could serve as a trigger, though you may wish to apply a looser or tighter rule.  Consider a tax efficient strategy if rebalancing in a taxable account.  Retirement accounts provide much more flexibility and are easy to get back on track. 

4: Review holdings

While keeping the overall diversification of your portfolio in mind, you can consider making adjustments to including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). The answer to the question of what to sell and where to reinvest will be different for each investor. 

When it comes to individual stocks and bonds, you may want to make sure you don't have too many of your eggs in one basket. In general, we believe you should avoid having too much in any one investment.  If you own individual stocks that have performed well, consider paring back this position and look to offset with any losses in your portfolio. Don’t forget to check on your company stock awards as well, as it can add up to a significant amount if you’re granted shares regularly.

Next, evaluate the performance of your mutual fund and ETF holdings relative to their peers. You can look up your holdings on Morningstar.com and look at their star ratings.  Consider the following:

  • Benchmarks: Each mutual fund or ETF in your portfolio can be compared to a benchmark to determine whether its performance is in line with its stated strategy and goals. It's also important to consider the level of risk taken to achieve that return. 


  • Revisit your positions. Consider whether your stock and fund holdings still make sense for your investment strategy and meet your expectations. Look for holdings to replace, trim, or increase, keeping in mind the costs and potential tax implications of a change.
  • Review your concentration. You may want to review any individual stock or bond holdings from a single issuer that exceed 5% of your overall portfolio and you think those positions have become too large a part of your portfolio. Keep your overall asset allocation and taxes in mind when considering any changes.

5: Assess overall performance

Your checkup should include an assessment of your portfolio's overall returns. You should check in at least annually, if not more frequently. When evaluating performance, context is key. You need to know two things: whether your portfolio is on pace to meet your goals, and whether it has performed as well as comparable investments over a reasonable period of time.

If your portfolio's performance has fallen short of your needs over a long time period or if you find you cannot tolerate the volatility of your investment mix, you may need to revise your strategy, perhaps by saving more or revisiting your investment allocation.

To make a meaningful comparison, check the returns of your stock, bond, mutual fund and cash holdings against benchmark indexes that are appropriate for each. Using benchmarks will give you a snapshot of your portfolio's performance relative to the market. Ideally, you want your returns to be close to, but (hopefully) exceeding, the relative benchmarks and exhibiting a level of volatility consistent or lower than those benchmarks. 

And it is important to note that most investors are in it for the long haul, so don't let short-term performance weigh too heavily in your decision-making.


  • Stay on plan. Successful investing can start with laying out clear goals and, over time, making sure your performance is on track to meet those goals.
  • Look for red flags. Keep an eye on holdings that are significantly under-performing their asset class benchmarks.

6: Get help if needed

Don't get discouraged if it seems like a lot of work.  A dedicated financial advisor should do most of the work for you, review it with you and answer any questions.  You should be receiving a performance review relative to appropriate benchmarks at least annually.  If you are not having these conversations or are not receiving performance reporting, it may be time to consider another advisor.  Comprehensive financial planning should incorporate all the factors highlighted above, and keep your portfolio in good shape to achieve your financial goals. 

Sandy Cove is happy to answer any questions you might have regarding your own financial situation, our process, or how we work with clients.   

Fidelity Viewpoints – 12/23/2020

Money.com - 12/14/2020

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