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How to Spring Clean Your Investment Portfolio


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I had coffee with a friend yesterday and I couldn’t believe how happy and energized he was. This guy was loving life. Do you know why?

He had cleaned his car!

I know it sounds crazy but it was true. He was so excited. He had dedicated some time. He had made an effort. He had rolled up his sleeves and scrubbed and polished. In the end, he had cleaned away years of dirt and grime and after he'd finished, he felt wonderful.

There is a lesson here.

When was the last time you did a complete and thorough review of your investments? When was the last time you took the time and put in the effort to really see what was going on? To get down to the nitty-gritty?

I know many of you look at your investments on a regular basis.

Every 3 months the 401k statement comes in the mail and what do you do? If you're like most people, you look to see whether you're up or down. You turn to the back of the statement and look at the performance of your investments. maybe you compare the performance of your investments to the others.

But when was the last time you looked to see if your asset allocation was still in line with your goals? Has it been more than a year? Has it been more than 5 years? For some of you, I bet it's been even longer than that.

It is important to monitor and review your investment portfolio on a regular basis. This is because things are always changing. Things are changing in the world and things are changing in our lives.

    As Woody Allen once said,
“If you want to make God laugh, tell him your plans.”

Not only do you need to monitor and review, you need to make changes in your investments to adjust for changing conditions.

Think about it this way, if you haven't done this in five years, you are now five years older. And of course, you are also five years closer to retirement. And depending on how close retirement you are, there may be changes you need to make. Decreasing your level of risk is a good example.

If you are now within a few years of retiring, you absolutely have some work to do. Now is the time to start funding the retirement income component of your Investment Portfolio. This is the part of your portfolio that will provide income once you stop working.

It is essential that you get this component in place. This is the part of your portfolio that adds stability to your retirement income. After all, you don't want your income to go down when the market or your investments go down.

Another thing to consider is the stock market. the US stock market had a good year in 2016. The Dow was up 13.4%; the S&P gained 9.5%; and the Nasdaq was up 7.5%. Click here for more information.

However, international stocks, as defined by the EAFE index, did not do as well. Click here for more information. In fact, they have underperformed US stocks for the last several years. Click here for more information. This could create an opportunity for you to improve your situation.

You could do this by taking some profits from the US portion of your portfolio. You could then invest those profits into foreign markets which have been down. The result would be selling high and buying low. Isn’t that what all good investors want to do?

There are also changes in interest rates, bonds, and the Federal Reserve to consider.

One of the first things you need to know is that bonds tend to have an inverse relationship with interest rates. This means that as interest rates go up, the value of your bonds tends to go down. Click here for more information. You need to be aware of what direction interest rates are heading. And what is going on with interest rates?

On Wednesday, March 15, the Federal Reserve raised interest rates by a quarter percentage point. They also stuck to their forecast of two more increases this year and three more in 2018. I think we can all agree that we seem to be in a rising interest rate environment. Click here for more information.

At the Hafner Financial Group, we have been addressing this concern in two ways.

One is by increasing our exposure to certain kinds of bonds. We want to be sure we have exposure to bonds that can do well in a rising interest rate environment. Click here for ideas on how to do this.

The other is by making sure we have enough short-term bonds. These are bonds that do not go down nearly as much as long-term bonds when interest rates rise.

I know this sounds like a lot of work. I'm sure there are other things you'd rather do. But keep in mind,

You are the one who is ultimately responsible for your own retirement.

And if you want to do your best to make sure you have a happy and successful retirement; this work needs to be done.

There is one other reason you might want to do this now rather than later. Do you remember how wonderful my friend felt after cleaning his car?

Just imagine how much better you’re likely to feel after you spend the time and energy to make sure your retirement dreams are back on track.

Happy Spring Cleaning!

 

If you would like some help…

Peter Hafner is the founder and President of the Hafner Financial Group,a Buffalo, NY based Financial Planning and Investment Advisory firm that specializes in helping middle class families throughout the United States plan and execute successful and happy retirements.

Click here to get a copy of 6 Steps to Your Dream Retirement.

If you would like to learn more about how the Hafner Financial Group could help you, please visit our website at HafnerFinancial.com. Or you could send us an email at info@HafnerFinancial.com, or call us at 716–650–4151.

 

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