Review Your Investments—Annually!

z1It’s important to keep track of your financial situation, especially your investments, says Ric Edelman of Edelman Financial Services. Doing it at least annually—ideally at year’s end—is how to stay on top of changes and make sound investment decisions.

Begin by reviewing your year. Were there major life changes that took place? Did you get married, or divorced? Did you have a child? Did anyone in your immediate family pass on? Look at the people closest to you, because they’re the ones who will affect the decisions that you make about your portfolio. Anytime you lose a family member, or anytime that you gain a family member, you need to reexamine your investments.

Adding to your family

z2 For those who have just gotten engaged or married, this is a good time to discuss your investments. Are you combining them together? How does each of you make your decisions about your portfolio balance? How will you make these decisions together about joint investments? Another way of enlarging your family is when you have a baby. Children change everything! You need to start thinking immediately about their education. Not just saving for college—though that’s the big one—but also all the expensive things that may happen between now and then: expensive summer camps, a high school year abroad, extra tutoring or sports participation. All of this is going to change how you distribute your portfolio and handle your investments, as you won’t be doing it on your own anymore. Weddings and new babies are great—you just need plan for, and around, them!

Losing your family

z3Another time when your financial picture changes is when you get a divorce. Divorce changes a great many things, including your investments. You’re probably going to have a whole lot less money, for one thing: lower income, fewer assets. This will no doubt impact your financial goals as well as your retirement plans, and you have to adjust your portfolio to fit your new circumstances. Different problems arise upon the death of a spouse. You will lose their pension, which you may have been counting on; you may be the beneficiary of their life insurance policy, which you never thought you’d be receiving. No matter what changes happened over the past year in your family life—engagement, marriage, a child, a divorce, a death—you and your financial planner need to look seriously at what these changes mean for your investments.

Changes to income

Okay, so your income is changing all the time. Hopefully it’s going in the right direction, and you’re either getting regular pay raises at work or doing some work on the side to increase your income.

But major changes warrant a clear financial strategy. If you lose your job (unfortunately all too common these days), if you get a new job with better money (or less money), if you retire, all of these scenarios affect your finances and all of the impact your financial planning. If you lose your job or if you retire, for example, your investments may need to start working harder for you, you may need to take bigger risks with your portfolio in order to generate income. The same idea goes for changes in your health that impact your work. If you’ve suffered some sort of illness or disability z4this year, then there again, your investments need to take up the slack.
If you need to draw on your investments to help you through a rocky patch—a divorce, an accident, an illness, losing a job, anything major like that—then you need to adjust your asset allocation. You need to re-imagine your future with this new situation in mind. If you planned to retire early and travel, you may need to adjust your expectations. If you were saving for your child’s education, those plans may need to be revised. Every time your life changes, your plans need to change, too, and your finances are where all that change starts.


If a life-changing situation arises, you may need to adjust your attitude toward risk in your portfolio: you may need to become a little more aggressive. Only you and your financial planner can tell what is right for you. But don’t wait for a big event: review your situation and your portfolio on an annual basis so you’re always on top of what’s best for you and your family.