Sending Your Portfolio Back to School

Children getting off school bus

When kids go back to school this fall, how much knowledge have they lost over summer break? While the stats vary, it’s not just students who can relate to “summer learning loss.” Did you put important investment decisions on the back burner over the summer?

Now that school’s back in session for most of the country, it’s also a good time to send your investments back to school for a refresher. That way, you can be confident they’re up-to-date with any changes in your life – and ready for the future.

Keeping up with current events

Are you concerned about how to sift through all the headlines about Brexit, speculation over Fed rate hikes, the upcoming presidential election and other global political uncertainties? Fortunately, sending your portfolio back to school doesn’t require that you ace a current events quiz. Concentrate on the bigger picture, and make sure you’ve accounted for any changes in your life.

It’s the mix that matters

A good lesson is to keep investing simple – own a wide variety of investments that perform differently from one another. In other words, diversify your portfolio. That way, it’s well-positioned for any of these current events – and others – that affect the markets. You may own investments that have recently disappointed and wonder whether diversification works. Staying diversified isn’t easy because investors tend to be least interested in owning out-of-favor investments, and those frequently perform better. Remember, without your having to try to predict, an appropriate mix of investment types – also called your asset allocation – can help you stay prepared for what happens next.*

3 R’s for your portfolio: Review, Rebalance, Refresh

Stick to the following three R’s to help keep your investment strategy on track.

  1. Review
    You’re investing because you have important long-term financial goals. Reviewing them can help you address any changes. Just as the teacher tracks your success, your financial advisor can show your progress toward your goals. You may need to reset your expectations about future investment returns. We expect long-term U.S. stock returns to be about 6% to 8% annually. Also, consider your comfort with risk: Can you stay invested through market volatility? After recent years, normal ups and downs could be hard to stomach. You can reduce those anxieties with an appropriate mix of stocks and bonds – and enough cash to cover current expenses as well as emergencies.
  2. Rebalance
    It’s easy to neglect one of the most important investment rules: rebalancing your portfolio regularly. Rebalancing simply means selling investments that have done well, or “selling high,” and buying those with lower prices, or “buying low.” We don’t know when stocks will pull back, but history suggests more volatility is probably ahead. That’s why you should make sure your investment mix matches your risk tolerance and aligns with your financial goals. Consider adding bonds and selling stocks to rebalance, if needed.
  3. Refresh
    Going back to school means being exposed to new ideas. Similarly, consider refreshing your portfolio by adding new investment types, if appropriate. Small- or mid-cap stocks, real estate and high-yield bond investments can help improve your portfolio’s diversification. And look for investments that have lagged behind over the past few years, including bonds and international developed-market stock investments. The types of investments that lead and lag usually change from year to year.

Get back to the basics

Taking your investments back to school is a way to stay focused on time-tested strategies for your portfolio. The three R’s of reviewing, rebalancing and refreshing your investment portfolio can keep you disciplined – and your financial advisor can help you track your progress toward achieving your goals over time.

Important Information

Diversification does not guarantee a profit or protect against loss.

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