Benefits of a Year-End Portfolio Review

Edward Clewell, AAMS, Vice President and Senior Financial Advisor, Univest Bank and Trust Co.

As the year-end approaches, our thoughts are of the holidays and spending time with family and friends, but this is also a good time to review your investment portfolio. It is important to maintain the desired risk and return levels and asset allocation in your portfolio.

Throughout the year it is possible that some investments have done better than others, which will change your risk level if left unchecked. Here's an example:

Assume your portfolio has a 50/50 stocks/bonds allocation, but during the year the stock portion has outperformed the bonds and now accounts for 60% of the portfolio. The portfolio is now actually a 60/40 mix instead of a 50/50 mix as was intended. The portfolio now has a higher allocation to stocks than may be appropriate. By re-allocating the 10% gain in stocks back to bonds you keep the portfolio risk as it was designed and at the same time take some of the profit from the appreciated stocks and add it to the bond piece of the portfolio. This is known as rebalancing.

The Advantages of Rebalancing

Another key benefit of rebalancing is that it prompts you to buy assets when their prices are low, making it easier to "buy low, sell high" rather than trying to predict which way the market will go in the future. While this strategy does not guarantee a profit, it does help to keep an investor disciplined to take profits from the winners in the portfolio and use the proceeds to buy the lower performing asset classes.

How often should a portfolio be rebalanced? This is unique to the investor and the portfolio, but should be done at least annually to keep the portfolio from becoming too heavily invested in a certain class of assets. It is also good to meet with your advisor annually to ensure your portfolio is being invested as it was originally designed, and your risk tolerance, circumstances and feelings toward the market are still aligned.

This holiday season, enjoy time with family and friends, but also make time to meet with your financial advisor to review your portfolio for the coming year. To schedule a meeting with a Univest financial advisor, call 215-703-5247.

Note that this financial institution does not give tax advice. Consult a qualified tax advisor for guidance about your situation. Investment products offered by Univest Bank and Trust Co.'s Wealth Management and Trust Division and Univest Investments, Inc., member FINRA and SIPC, a licensed broker dealer and investment advisory subsidiary of Univest Corporation of Pennsylvania, are not insured by the FDIC or any federal government agency, are not a deposit or other obligation of or guaranteed by the depository institution, and are subject to risks, including the possible loss of principal amount invested.


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