Spring is right around the corner, along with tax season! There’s no better time to review your investment strategy and your portfolio. Your goal shouldn’t be to fully overhaul your approach, but simply to determine whether you need to make any adjustments.
Portfolio performance isn’t the only factor to consider when reviewing your strategy. You should make sure that you:
- hold the right asset allocation for your investor profile
- remain focused on long-term goals
- haven’t accumulated too many securities over the years
- know why you’re holding these securities
- have enough liquid assets in your portfolio to seize opportunities
Staying on track
In the first quarter of 2019, stock markets became volatile once again. Desjardins economists believe that the fundamentals remain solid and that the stock market outlook is positive for the next year.1 According to Deutsche Bank, a correction occurs on average every 357 days, or once a year.
After a 10-year bull market, many investors facing instability and potential new drops are wondering if they should sell their securities and invest elsewhere. If this is where you find yourself, we recommend following these tips:
- Re-evaluate your investment objectives.
- Rebalance your portfolio—diversification is essential.
- Consider your investments over the long term.
- Don’t think about stock price fluctuations as losses or gains.
- Remember that down years are often followed by up years with strong potential gains. If you sell when the market is low, you could miss out on excellent returns on the first days of the rebound.
A diversified portfolio is key
Diversification is key to a strong portfolio performance and protects you against the effects of market fluctuations. Rebalance your asset mix while maintaining optimal diversification. Spread your investments over several asset classes, regions and sectors that match your investor profile, tolerance level and objectives.
Over time, investments may start generating different returns, which could shift your view on your asset allocation and your objectives. Rebalancing your portfolio will help you make sure you’re on track to achieve your current goals. It also gives you the chance to manage risks and jump on opportunities, no matter which way the markets are headed.
When you rebalance your portfolio, your might want to sell certain assets that have gone up in value to buy securities in underweight asset classes and get back to your original asset allocation.
Rebalancing also provides an opportunity to review your strategy. There may be changes in your personal situation or goals that justify increasing or reducing securities, bonds or other asset classes to properly reflect your new risk tolerance.
So take the time to review your portfolio. It’s a good investment!
1Sources: Desjardins Economic Studies, S&P, Dow Jones Indices