investment objectives

Should You Adjust Your Investment Portfolio As You Get Older?



Posted on: 21st November 2023

 As you reach retirement age, your retirement portfolio is viewed as your crucial financial support so you can live comfortably once the working days are behind you. Retirees with substantial portfolios can comfortably live off of the returns without ever having to touch the principal. However, those with smaller portfolios will likely find needing access to those funds eventually. Understandably, over time, you may need to rebalance your retirement portfolio to ensure that your asset allocation consistently aligns with your acceptable risk tolerance. That is why we advise seeking professional guidance from independent financial advisers Cheshire regarding your investment objectives to get valuable insight.

The Benefit of Rebalancing

Over time, your portfolio’s asset allocation may shift because of fluctuations in the market. Rebalancing will help in maintaining your desired allocation and ensure that your investments line up with your risk tolerance and long-term objectives.

If left unchecked, your portfolio could heavily weigh in one asset class, leaving you exposed to more risk than you intend to be. With rebalancing, you can redistribute your investments and maintain an acceptable level of risk. When you have your portfolio reviewed regularly, you can reevaluate your investment strategy and adjust it when it needs it. During retirement, your financial needs and goals may change.

How Often Should You Rebalance?

Naturally, there is not one singular answer. The ideal frequency depends on circumstances and preferences. However, rebalancing once a year is often sufficient enough for a majority of investors. That allows you to take advantage of market performance whilst making the impact of short-term fluctuations minimal.

Some investors prefer rebalancing more frequently than that, such as every six months or every quarter. Doing it this way also offers some benefits and opportunities to adjust your portfolio and respond to market changes. It would all come down to seeking the best advice from your independent financial adviser Manchester to be sure of how you stand.

Helpful Pointers

Here we have some helpful tips towards rebalancing your portfolio. Start with establishing specific allocation targets within each asset class across your portfolio. When an asset class significantly deviates, it will be time to rebalance.

When rebalancing, keep transaction costs and potential tax implications in mind as they can eat into your returns when not managed well. Stick to the rebalancing plan and stay away from those impulsive decisions fueled by market movement and emotion. Staying consistent with your approach will keep you on track towards your investment goals.

As you get older, your personal risk tolerance and investment objectives will change. Adjusting your portfolio as you enter retirement will help align it with the new risk appetite and investment goal. It is crucial to take this step at retirement to safeguard your capital.

For more information, contact our helpful team at Haven IFA for retirement planning Manchester.