Review Your Investment Strategies Regularly

June 3, 2020 |
Article | 5 min
| Personal Insights

Your investment goals may change throughout your lifetime. It's important to revisit your approach to ensure your financial future stays on track. Participate in the events below to guide your portfolio in the right direction.

Review your risk tolerance

When it comes to investing, everyone is unique. Some people prefer a more aggressive approach, especially if they are younger and have a lot of saving years ahead of them. Others prefer a more conservative approach, especially if they are nearing retirement. Others may be most comfortable with a moderate approach — an equal balance of aggressive and conservative investments. You should review your attitude toward investment risk on an annual basis — especially if there have been any life changes, such as marriage, birth or adoption of a child, divorce, nearing retirement, or adding new financial goals in addition to retirement.

Embrace diversification

Putting your money into many different types of investment options that include various asset classes can help reduce the risk of overexposure to a single investment or asset class. Generally speaking, if you diversify your dollars into different asset classes, a decline in one asset class (i.e. utilities) should not have a significant impact on your overall portfolio. There is perhaps a no better way to illustrate this than to look to the story of Life Savers candy.

Clarence Crane invented Life Savers in 1912. He manufactured only one flavor: Pep-O-Mint. In 1913, Crane was approached by Edward J. Noble. Noble suggested that offering different flavors of Life Savers would attract more customers. Crane wasn’t interested in the concept but agreed to sell the business to Noble for $2,900. In his lifetime, Noble went on to develop a billion-dollar business manufacturing different flavored Life Savers. By diversifying his product, he appealed to more people and protected his business from the risk of one flavor losing popularity.

Diversification works with investments, too. You should keep in mind that diversification does not ensure a profit or guarantee against loss.

Rebalance your investments

It’s no secret that investments rise and fall over time. And asset classes do not always rise and fall together. As such, your original game plan to diversify across different asset classes may drift over time. Let’s say that last quarter there was a stock market upswing and your original desired investment allocation of 60% in stock funds has now grown to 70%. Meanwhile, your intended investment allocation to bond and money market funds has now decreased. The current overall investment allocation no longer matches your wishes and may have become riskier than you are comfortable with.

One solution for this is to choose to participate in an automatic rebalancing program if one is offered by your retirement plan recordkeeper. If you don’t have access to such a service, it’s easy to rebalance your investments yourself. In the example mentioned earlier, that means going into your account and selling off 10% of your stock fund investments and reallocating those funds back into your bond and money market investments so that they are aligned with your chosen allocation percentages. Representatives at your recordkeeper’s call center can likely help you do this.

Seek professional help if you need it

Many people consult with an investment advisor for guidance and advice regarding their retirement plan investments. An advisor can help you determine your retirement goals and how you can pursue them. They can:

  • Provide ongoing portfolio rebalancing on your behalf.
  • Help you understand different types of investments and their place in a balanced investment portfolio.
  • Help you determine your financial goals beyond retirement, such as buying a home, funding a college education, starting your own business, or just getting better at budgeting and paying down credit card debt.
  • Help you determine an appropriate investment strategy to achieve your financial goals, which are based on your risk tolerance and time frame.
  • Meet with you on a regular basis to track progress and adjust as necessary.

Heartland Retirement Plan Services 1398 Central Avenue, P.O. Box 941, Dubuque, IA 52004-0747

This newsletter is a publication of Heartland Retirement Plan Services, whose role is solely that of publisher. The articles and opinions in this newsletter are those of Heartland Retirement Plan Services. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation. Products offered through Heartland Retirement Plan Services are not FDIC Insured, are not bank guaranteed and may lose value.