Money Matters / Retiring soon? Reassess your portfolio
Peter and Claire are a married, dual-income couple. Soon after their youngest child's wedding they realized that retirement wasn't far off. What's more, though they'd kept an eye on their retirement plan and investment portfolios, the couple hadn't made many changes recently. They sat down with their financial adviser to discuss the matter.
She began by noting, as she often did, that it's important to consider rebalancing one's retirement plan and investment allocations at least annually. Plus, with the volatile stock market of late, Peter and Claire's allocations may have deviated from their goals. And, as the couple suspected, the appropriate allocation usually changes as a person gets closer to retirement.
Check the foundation
Their adviser suggested they begin their annual review with a close look at their "core holdings." These are the investments chosen to give their portfolios steady, long-term results that get them as close as possible to their financial goals.
Their core holdings need not--and, often, should not--be the couple's best or worst performers. But older investors, such as Peter and Claire, who are becoming more focused on preserving their assets (rather than on growing them), would probably favor an even more conservative mix of investments at their portfolios' core.
So, their adviser said, it wouldn't hurt to check and see whether any changes (for example, moving some money into a diversified high-quality bond fund) are needed.
Review the amenities
At this point, the couple's adviser tried out a metaphor. If their core holdings are the foundation of their retirement house, their "noncore holdings" are the amenities--the investments that, by enhancing their return potential and reducing their overall risk, make it a place worth living in.
Their adviser suggested the couple review whether their noncore holdings are fulfilling needs that, otherwise, would go unfulfilled. More specifically, many investment types in this category take on more risk to, ideally, drive up the portfolio's value in a manner that the core holdings can't.
For example, their adviser noted, commodities tend not to follow the general rhythms of the wider stock or bond markets. Although this does make them volatile, commodities can also provide a boost when more mainstream investments aren't doing so well.
No reminder necessary
Upon leaving their financial advisor's office, Peter and Claire had another realization: Staying on top of their retirement plan and investment allocations was more important than ever now that they were on the brink of retirement.
This has been a general discussion and is not intended as advice to anyone. Always consult a qualified advisor before retirement-planning decisions.
Norm Grill is the managing partner of Grill & Partners LLC, certified public accountants and consultants to closely held companies and high-net-worth individuals, with offices in Fairfield and Greenwich. He can be reached at 203-254-3880 or N.Grill@GRILL1.com.