Step 4 – Review Your Investment Results
Using an experienced financial advisor to oversee the asset allocation strategy, as well as the investment managers used, may help provide a valuable conduit to reaching the client’s goals.
Strategic Asset Allocation
A well-developed asset allocation plan is only the beginning when it comes to achieving an investor’s goals. As markets move up and down, the allocation of an investor’s assets may become skewed toward one asset class or another. Rebalancing, therefore, is important in order to maintain the asset allocation you worked so hard to develop. Because different asset classes do not always perform in relation to one another, allocations can and do change over time. If appropriate steps are not taken to rebalance allocations, the potential benefits of asset allocation can be diminished.
In addition to monitoring asset allocation, it is very important to review the managers in the portfolio on a regular basis. It is not enough to simply look at performance alone. Other factors to consider include performance attribution, style consistency, changes within the management team or organization, fees and expenses, and many others. Changes or inconsistencies always warrant further investigation, and in some cases, possible replacement of a manager.
Finally, review your investment results and revisiting one’s goals regularly is necessary as clients move closer to retirement. It may make sense to adjust their asset allocation to accommodate a lower risk tolerance due to a shorter time horizon.1
1 Asset allocation cannot eliminate the risk of fluctuating prices, uncertain returns or periods of market volatility.Go to next step