Spring is nature’s reminder that growth requires maintenance. The same principle applies to your investment portfolio. Regular reviews help ensure your investments stay aligned with your goals, properly balanced, and positioned for long-term success. Here’s your guide to giving your portfolio a thoughtful spring refresh.
Why Regular Portfolio Maintenance Matters
Over time, market movements naturally push your portfolio out of alignment. A stock that was 10% of your portfolio a year ago might now be 15% after strong performance. Conversely, underperforming investments can become dead weight, dragging down returns without serving a clear purpose. Without periodic reviews, these imbalances compound, potentially exposing you to more risk than intended or causing you to miss opportunities.
Your Spring Portfolio Review Checklist
1. Check Your Asset Allocation
Start by comparing your current allocation to your target. If stocks have had a strong run, you might be overweight in equities relative to bonds or other assets. This drift is natural, but it means you could be taking on more risk than appropriate for your situation. Rebalancing brings your portfolio back to its intended risk level.
2. Evaluate Individual Holdings
Look critically at each investment. Is it still serving its intended purpose? Some questions to consider:
- Are any holdings consistently underperforming their benchmarks?
- Do you have unnecessary overlap or redundancy?
- Have any funds experienced manager changes or strategy drift?
- Are expense ratios competitive, or are you paying too much for similar exposure?
3. Reassess Your Risk Tolerance and Timeline
Life changes, and your portfolio should evolve with it. Major milestones—career changes, approaching retirement, family developments—often warrant adjustments to your investment approach. Even without major life events, your comfort with volatility may shift over time.
4. Optimize for Tax Efficiency
Consider the tax implications of any changes. Selling appreciated investments in taxable accounts triggers capital gains, while losses can offset gains elsewhere. Strategic rebalancing might involve:
- Prioritizing sales in tax-advantaged accounts where possible
- Harvesting tax losses to offset gains
- Being mindful of short-term vs. long-term capital gains rates
- Directing new contributions to underweight positions rather than selling overweight ones
5. Look for Portfolio Gaps
Are there areas where your portfolio could be strengthened? This might include:
- International diversification if you’re heavily U.S.-focused
- Exposure to different market segments or sectors
- Alternative investments that complement your core holdings
- Inflation-protected assets if that’s a concern
“Sell in May”: A Reminder to Prune Your Portfolio
The old Wall Street adage “Sell in May and go away” wasn’t meant as blanket advice to exit the market seasonally. Instead, think of it as a useful annual reminder: May is the time to identify and eliminate underperforming holdings that are dragging down your portfolio.
Every portfolio accumulates deadwood—investments that made sense once but no longer serve their purpose. Maybe it’s a speculative position that didn’t pan out, a fund that’s consistently lagged its benchmark, or a holding you inherited and never evaluated. Spring is the perfect time to be honest about what’s working and what isn’t.
The key is being selective. You’re not “selling in May” indiscriminately—you’re strategically removing inferior investments that don’t earn their place in your portfolio. This makes room for better opportunities and ensures every holding contributes to your overall strategy. Think of it as weeding a garden: you’re not abandoning your garden in May, you’re removing what’s choking your best plants so they can thrive.
Beyond the DIY Approach
While understanding these concepts is valuable, implementing them effectively requires navigating trade-offs. Should you rebalance now and trigger a taxable event, or wait? Which underperforming investment truly deserves to be cut versus which is experiencing temporary weakness? How do you coordinate changes across multiple accounts—401(k)s, IRAs, taxable accounts—to maximize tax efficiency?
A comprehensive portfolio review goes beyond surface-level rebalancing. It includes coordinating with your overall financial plan, optimizing asset location across account types, and stress-testing your strategy against various market scenarios.
Take Action
Spring is an ideal time to ensure your portfolio is working as hard as you are. Whether you tackle this yourself or work with an advisor, the important thing is making it a regular practice. See if we’re right for you to schedule a comprehensive portfolio review and discover opportunities to strengthen your investment strategy.
