Monitoring Your Portfolio

The example, Income Streams, offers a simplistic way of looking at asset allocation, but it also provides an overall game plan that you can keep coming back to. It will, in time, be adjusted to stay in line with changes in your lifestyle and future plans as well as changes in market conditions. I recommend a six-month review, unless an emergency arises and there is a dramatic change in your immediate needs.

As you review every six months, you should ask yourself:

• Do I need more money?
• Can I manage on less money?
• Are my investments performing as anticipated?
• What market changes have an affect on my portfolio?
• What major expenses do I anticipate within the next two years?

Unless someone’s lifestyle changes, or in the event that the investment vehicles we’re using to generate income are not paying enough to get the percentage we’re looking for, we will not make changes. When the bond market has higher rates of return compared to historical returns, we are able to reach income goals by investing less money in this category. Conversely, when equities do well and bonds are not doing as well, we are able to take some of the growth in equities and put it in bonds. This may seem counterproductive, but during the years 2000–2002, this proved to be a smart strategy.

While you need not make major or frequent changes, you’ll change your asset allocation over time.