Update Your Financial Plan Annually For Investment – Part 1

Wednesday, November 16, 2011, AM | Comments are off

The bad economy keeps dragging its feet and pulling down the pants off of our personal finances. It’s an insult to our core senses. Needless to say these uncertain times make it essential to update your financial plans annually. It’s more crucial now than ever to have your annual financial review with the help of your financial adviser.

I have divided the financial plan into five separate posts, each of which you might want to revisit annually:

  1. Investing goals
  2. Paying special attention to your tax-paying adventure
  3. Updating your estate plan
  4. Updating your retirement plan
  5. Updating your insurance

Investing goals

Your investing goals may have changed this year to the point that an yearly review becomes essential. You have multiple savings goals that may have resulted in investment portfolios that need to be revisited annually. If your financial situation has changed, make adjustments as needed.

For example, you may have been saving for a new home or your children’s college education. So you might want to adjust your investment targets to reflect current real estate conditions and college tuition costs.

  1. Asset Allocation & Rebalancing
    This might be the time to check your asset allocation to ensure that it continues to meet your investment needs and preferences. Also perform any rebalancing that might be necessary in light of the past year’s market performance.

    With the help of your financial adviser, take some time to look at specific investments. Review and evaluate whether they continue to have a positive role in your portfolio.

    For example, if you have invested in mutual funds, check to see if any of them have changed their objectives, risks, performance. Most of all eliminate duplication. If you own stock in individual companies, evaluate the companies’ current status and prospects, and decide whether keeping them is justified in your stock portfolio. Educate yourself to identify stock market phases.

  2. Invest in Mutual Funds
    By the way, investing in mutual funds is far better than individual stocks. If you don’t have the time or the inclination to do research necessary for individual stock investing, the alternative for small investors can be mutual funds. They can be the perfect way to invest in stock. By default mutual funds give you instant diversification, convenience, professional management, affordability. It might give you discipline as well.

  3. Automatic investment plan
    Adjust your investment plan and goals as needed to increase your likelihood of success. For example, you may decide to establish an automatic investment plan to invest toward your goals on a regular basis.

In a Nutshell
Visit your financial plan every year. Adjust your portfolio accordingly. Next we will discuss Update Your Financial Plan Annually For Taxes – Part 2.

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