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Financial Fitness: Prepare for your annual financial review

Given the complexities of the investment world, working with a financial professional can help you move toward your goals such as a comfortable retirement.

You’ll want good communication and should meet in person at least once a year to review your portfolio. At these annual reviews, you’ll want to cover various topics. The progress of your portfolio: You will want to discuss how well your investments are doing.

Of course, you can follow their performance month to month, or even day to day, by reviewing your investment statements and online information, but at your annual meeting, your financial professional can sum up the past year’s results, highlight areas that have done well or lagged, how your portfolio is performing in terms of your goals.

Your investment mix: Your combination of investments – stocks, bonds, government securities and so on – helps determine your success as an investor. But in looking at the various investments in your portfolio, you’ll want to go beyond individual gains and losses to see if your overall mix is still appropriate for your needs.

For example, is the ratio of stocks to bonds still suitable for your risk tolerance? Over time, this ratio can shift, as often happens when stocks appreciate so much that they now take up a larger percentage of your portfolio than you intended – with a correspondingly higher risk level.

If these movements occur, your financial professional may recommend you rebalance your portfolio to align it more closely with your goals and risk tolerance.

Changes in your family situation: A lot can happen in a single year. You could have gotten married, divorced or remarried, or moved to a new, more expensive house – the list can go on.

And some, if not all, of these moves could certainly involve your financial and investment pictures, so it’s important to discuss them with your financial professional.

Changes in your goals: Since your last annual review, you may have decided to change some of your longterm goals. Perhaps you no longer want to retire early, or you’ve ruled out that vacation home. In any case, these choices may well affect your investment strategies, so it’s wise to discuss them.

Changes in the investment environment: It’s a good idea to establish a long-term investment strategy based on your goals, risk tolerance and time horizon, and stick with this basic strategy regardless of the movements of the financial markets or changes in the economy.

Still, this doesn’t mean you should never adjust your portfolio in response to external forces.

For instance, if interest rates were to rise steadily over a year’s time, you might want to consider some changes to your fixed-income investments, such as bonds, whose value will be affected by rising rates. In any case, it’s another thing to discuss during your annual review.

Deborah Leahy is an Investment Advisor with Edward Jones, Member CIPF, deborah.leahy@edwardjones.com

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