Investments Review Checklist

Issues to Consider When Reviewing Your Investments

Reviewing your investment portfolio is a critical part of the financial planning process. Particularly during times of uncertainty and volatility, a portfolio review can evaluate and confirm your strategy, ensuring its alignment with your financial goals.

On the following checklist, we cover some key topics to consider during the review of your investment portfolio, including:

  • Investment Objectives
  • Time Horizon and Risk Tolerance
  • Diversification and Asset Allocation
  • Tax Management, Including Capital Gains and the NIIT
  • Performance Monitoring

INVESTMENT OBJECTIVES

Do the goals, time horizon, and objectives of your investment portfolio need to be reviewed, updated, or documented?

If so, consider the following:

  • If you are funding a planned major purchase or expenditure, review your timeframe and liquidity needs.
  • If you intend to transfer an account to future generations, ensure that it is managed and titled properly, and addressed in your estate plan.

Do you need to assess or review your risk tolerance?

If so, consider your resources, earning capacity, philosophy, phase of life, and personal financial goals. Also weigh your capacity and need for risk.

Do you need to determine if you are on track to meet your goal(s)?

If so, consider the following:

  • Ensure that your expected returns (growth and income) are reasonable.
  • Apply appropriate tax and inflation adjustments.
  • Review your retirement and life expectancy projections.

If you are taking distributions, have the spending and distribution rates been reviewed?

Do you need to review performance measurement methods?

Do you have assets outside of your portfolio and/or future sources of income (e.g., pension, Social Security, annuity)?

If so, consider how these resources affect your risk tolerance. A reliable lifetime income stream, from outside of your portfolio, could offset portfolio risk.

INVESTMENT ISSUES

Does your aggregate asset allocation need to be reviewed?

If so, consider reviewing your portfolio as a whole to help identify/ avoid concentrations, wash sales, etc.

Do the investment selection criteria need to be reviewed and updated?

If so, consider the investment philosophy and expense ratios for each investment, and the trading activity within each account.

Do the investment monitoring criteria need to be reviewed and updated?

If so, consider the performance relative to peers and any changes to the investment manager team.

If you rebalance your portfolio, does the rebalance plan need to be reviewed?

If so, consider whether this should be done periodically, or when allocations drift from their targets by a predetermined amount.

Do you have tax-exempt, tax-deferred, and taxable investment accounts?

If so, consider choosing asset location to maximize returns (e.g., hold tax-efficient assets in taxable accounts, hold income-producing assets or assets distributing large capital gains in tax-efficient accounts).

Are you taking or planning to take distributions from the account(s)?

If so, consider your allocation to cash, and strategies to raise cash.

Do you have any significant positions that represent a large portion of your portfolio (such as company stock)?

If so, you may be subject to concentration risk.

Do you have any investments you want to own or exclude from your portfolio?

If so, note your instructions and rationale (e.g., legacy, professional, tax considerations). If you would like to align your investing with ethical considerations, explore socially responsible investing (SRI), environmental, social, and governance (ESG), and impact investing strategies.

Do you need to open a new account specifically tied to an investment objective, or consolidate existing accounts?

If so, consider the following:

  • Take advantage of any tax-preferred accounts that align with your goals (e.g., 529s for education funding, HSAs for healthcare funding, 401(k)s, IRAs, etc. for retirement funding).
  • When rolling over retirement accounts, be mindful of the impact and applicable rules.

TAX ISSUES

Do you have a taxable account and are you funding your current cash flow needs?

If so, consider tax-efficient income generation and distribution strategies.

Do you have a taxable account consisting of long-term positions with low cost basis?

If so, consider the following:

  • If your taxable income is below $44,626 ($89,251 if MFJ), your long-term capital gain rate is 0%.
  • If your taxable income is between $44,626 and $492,300 ($89,251 and $553,850 if MFJ), your long-term capital gain rate is 15%.
  • If your taxable income is above $492,300 ($553,850 if MFJ), your long-term capital gain rate is 20%.

Do you have a taxable account and is your MAGI in excess of $200,000 ($250,000 if MFJ)?

If so, consider strategies to manage your net investment income (minimizing the 3.8% NIIT), including investing in municipal bonds, which are not subject to federal taxation (and in some cases state taxes).

Do you hold assets with a tax loss?

If so, consider the following:

  • You can harvest losses to offset gains and up to $3,000 of ordinary income.
  • If you have multiple lots, the actual-cost method of tracking basis lets you choose which lots to sell, allowing the selection of high basis shares to increase the amount of your realized loss.
  • Be aware of the wash sale rules.

Are you trying to minimize your tax liability?

If so, consider the following:

  • You may wish to limit trading within your taxable accounts, to control gain realization (to the extent possible). Long-term gains are preferable to short-term gains (taxed as ordinary income), but still increase your total income, can trigger AMT, and can affect your eligibility for miscellaneous exemptions, deductions, and credits, and other income-related preferences and adjustments.
  • If you own mutual funds or interests in REITs or MLPs, be prepared for unique tax consequences (e.g., gain distributions, depreciation recapture, etc.).

OTHER ISSUES

Is there a plan in place during periods of market decline?

Do you need help understanding investment fees and charges (including management, transactional, wrap, 12b-1, sales loads, commissions, etc.)?

Do you need to assess how future contributions will be handled? Do/did you participate in any employer stock plans?

If so, monitor your rights to shares, their tax treatment, and the percentage of your overall portfolio that consists of employer stock, mitigating any concentration.

Does the frequency of any account reviews and monitoring need to be updated?

Do the roles and responsibilities of interested parties, professionals, fiduciaries, or others involved need to be reviewed?

This checklist was prepared and first distributed by fp PATHFINDER.

DISCLAIMERS

This material is intended for general public use. By providing this material, we are not undertaking to provide investment advice for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact one of our financial professionals for guidance and information specific to your individual situation. This is not an offer to buy or sell a security.

Shore Point Advisors is an investment adviser located in Brielle, New Jersey. Shore Point Advisors is registered with the Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Shore Point Advisors only transacts business in states in which it is properly registered or is excluded or exempted from registration. Insurance products and services are offered through JCL Financial, LLC (“JCL”). Shore Point Advisors and JCL are affiliated entities.

SHARE THIS POST!

Facebook
Twitter
LinkedIn
Email