Annual portfolio reviews can be a touchy thing for investors, as some are constantly checking their portfolios throughout the year, obsessing over prices, while others only look at them once a year and making a blanket statement to themselves about how it did. But neither of those are really the right perspective, says Ken Fisher, founder of Fisher Investments, in a video posted to the Fisher Investments YouTube channel.
Instead, investors should ask themselves what their goals are and what they want their portfolio to do for them, and what they need to have in their portfolio to accomplish those goals. For most people, those questions have fairly simple answers, such as “take care of me and my spouse for the rest of our lives” and “leave some money to our offspring” or “give some money to charity,” Fisher contends. Then, it’s important to determine how much time they have ahead of them, and it’s generally longer than they think, because older people are living longer and longer. Typically, those with a long time horizon want an equity-based portfolio. “Don’t…overthink it,” Fisher advises, adding “make it simple.” Passive investing is absolutely acceptable, as is a managed portfolio that is “aimed right down the middle” and isn’t too far out there or too risky.
In the long run, stocks typically perform better than other liquid assets, and as investors age they will need a decent amount of liquid assets. Older investors may want to add in bonds to dampen their volatility, and maybe a little bit of fixed income. The bottom line is, Fisher says, an annual portfolio review should really be an assessment of whether your portfolio is comprised of things that will get you to where you need to go.