Generally, you feel better—more confident—when you are sporting a new look, and sometimes, even the smallest changes can make a big difference in your attitude.
Doesn’t your investment plan deserve the same kind of attention? After all, someday it’s going to be taking care of you. Perhaps your portfolio is overweighted in stocks. Maybe you would like to spice up your portfolio with commodities. Whatever you have in mind, it is always a good move to regularly review your investments, and make decisions about your financial strategies.
A typical annual review compares your portfolio’s annual performance against broad benchmarks, such as the S&P 500 Index. But Wells Fargo Advisors clients can perform a more valuable analysis by incorporating that traditional review into the Envision® planning process.
Rather than simply comparing results against impersonal benchmarks, an Envision year-end review analyzes your portfolio’s performance in the context of your own goals and priorities. “The Envision process creates a customized, personalized benchmark for each client,” said Greg Shiveley, First Vice President of FA Platform, Wells Fargo Advisors’ Strategic Solutions Group. “That lets you know how you’re doing toward achieving the things that are most important to you.”
To help put your financial priorities in perspective, ask yourself the following three questions:
- Have my priorities changed with my life?
Your investing strategy is built around long-term goals. Priorities can change, however, with major life events, such as getting married, having a baby, getting a divorce, or taking a new job.
If you have experienced a major life change in the last year or so, consider its impact on your financial priorities. For example, if you welcomed a child or grandchild into your family this year, starting a college savings fund might be a significant new priority. But saving for such a goal could mean compromising in other areas, such as retirement planning.
Because the Envision process is built on prioritizing numerous financial goals, you will be in a good position to make adjustments and accommodate new, more pressing priorities. “When your life changes, you don’t have to blow up your plan and start all over,” Greg said. “Instead, it’s all about incorporating those changes into your existing plan.”
- Am I still on the same page with my money goals?
Once you have reviewed your goals and priorities, examine whether your portfolio’s returns are keeping you on track to meet them. The Envision process makes it easy to gauge your progress from year to year. Instead of using a single scenario, your financial advisor helps you develop a range of scenarios for your investments—from ideal (living life to the fullest) to acceptable (compromising on some goals, so you can achieve your top priorities).
- Does my plan need a new look, too?
Changes to your investing strategy will depend, in part, on the answers to the previous two questions. But even if your priorities haven’t changed, and you are making good progress toward your goals, it is still important to review your asset allocation and investment strategy.
For example, you are now one year closer to retirement. Depending on your age, it could be time to start adopting a more conservative allocation. Or market gains and losses may have caused big swings in the value of your holdings, causing your portfolio to fall out of line with your recommended allocation. In this case, you may need to rebalance your portfolio to bring your stocks, bonds and cash holdings back in line with their target allocations.
A regular review and rebalancing is important to help any portfolio stay on track. And even if you make only minor tweaks, you will avoid a common pitfall for many investors, which is never updating the plan they have created. “Change is the No. 1 thing clients have to manage,” Greg said. “So, it’s good to check in at least on an annual basis to say, ‘Hey, this plan isn’t done—it’s ever-evolving.’”
Envision is a registered service mark of Wells Fargo and Company and used under license.
This article was written by Wells Fargo Advisors and provided courtesy of David DeNitto—Branch Manager and Senior PIM Portfolio Manager and Kristofer Lange—Financial Advisor in Mesa at (480) 830-5250.
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