How to Do a Portfolio Check in the Middle of the Year

It has been a tough year for investors. Almost four months ago, experts announced the end of the bull market after a series of falls. However, after the stock market fell nearly 35%, investors saw a quick recovery. The second quarter ended well , almost erasing the losses from February and March. Now that the markets are stable – if anything, now is perhaps the best time to test a portfolio . You can do it yourself by following these steps from Morningstar .

Start with your emergency fund

If the pandemic has affected your work, you may have already poured your savings to cover the basics. But if your income is stable, now is a good time to fund your accounts. While experts suggest setting up a contingency fund to cover three to six months’ expenses, any amount helps. Even $ 500 or $ 1000 in a savings account can help you avoid using high-interest credit cards as a last resort.

Review your overall plan

Your investment goals are unique to you. You may be saving and investing as a down payment, a college fund, or for retirement. So, start by reviewing your progress towards your goals, including how much you saved in 2020. Morningstar says that saving 15% on your paycheck is a great starting point, while 20% may be more appropriate for higher earnings. Fidelity offers some basic retirement savings benchmarks here .

Check your assets

After reviewing your plan in detail, you can review your portfolio. You can use Morningstar’s Instant X-Ray for a free breakdown – or allocation of your assets. This will show your interest on stocks, bonds and cash.

If you don’t already have an investment policy statement , consider writing one. Your statement can serve as your roadmap for future decisions. It can include target benchmarks – which take into account your risk tolerance and investment timing – for each percentage of assets. This chart can be useful for determining the distribution of retirement assets. Morningstar also has several portfolio examples .

Consider rebalancing

After an unstable spring, your asset allocation may differ from its original benchmarks. For example, when the stock market is doing well, your percentage of stocks may be too high. You can fix this by changing the balance – selling some assets of one type and buying more than the other.

However, always consider the tax implications before making changes. You should focus on rebalancing investments in your tax-protected accounts like 401 (k) or IRAs to avoid your tax bill next April. If your taxable account, like your brokerage, needs to be rebalanced, take advantage of the weaker allocation, saving and investing more money over time.


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