Update Your Financial Accounts and Investment Portfolio in 2020 | The smart investor


The global health crisis has radically changed the way we live, work, study, vacation and more. The shutdowns that began in March remain for many in one form or another, with summer plans and holiday celebrations taking on dramatically muted tones. This year has certainly not gone in the way most expected, but it has provided a unique opportunity to master your investments and financial accounts.

Update your financial accounts. Take extra time for “spring cleaning” to pull out estate documents – your will, living trust, health care directives, power of attorney – and review them for accuracy and completeness. necessary updates. Have the beneficiaries changed? Are the charities listed still relevant and important? Are health care guidelines in place for adult children?

When updating and reviewing estate records, remember the critical next step of confirming proper financial account title and beneficiary designations. This is essential to ensure accounts are properly titled for specific purposes. For example, too often families get a living trust drafted only to forget to change the title of accounts and assets to put them in the trust. This omission can leave assets unprotected from creditors and exposed to probate, which is both costly and time-consuming.

Check the assets. The dramatic movements in the financial markets have strained the nerves of many. Periods of extreme volatility are an appropriate time to review the overall asset allocation of your portfolio to see if market fluctuations have derailed a plan. Rebalancing to ensure holdings are still aligned with plan targets and objectives is key to ensuring risks remain controlled.

Additionally, periods of market volatility and economic stress can alter the underlying profile of many holdings within portfolios, so it is important to take advantage of these opportunities to “look under the hood” and ensure that investments made before the crisis are still the most appropriate to own during and after.

For example, some sectors, such as airlines and hotels, may have suffered economic pressures or risks that could jeopardize or significantly slow their recovery. Highly leveraged companies can see their stocks come under severe pressure when business slows, so an investor needs to know where the risks might be lurking.

Understand interest rates. Leveraged investments, like many exchange-traded funds that borrow money to improve returns, can do relatively well in times of falling interest rates, but conversely they could see their net asset value fall precipitously when rates eventually rise. It is important to know what you own and to improve the quality of your portfolio, if necessary, to ensure that each of the investments is always appropriate. Adjusting a portfolio to reflect your current financial goals helps you weather market volatility and better position yourself for a potential rebound.

Similarly, interest rates paid on savings may have risen or fallen significantly, so research to ensure your cash and bond accounts are maximizing available opportunities is critically important to optimizing returns. With the Federal Reserve remaining dovish, interest rates are likely to remain low for some time, so doing your research on yields is imperative.

For many, the global health crisis has brought additional financial stress and worry.

While no one can predict when our lives will return to “normal”, we can all take advantage of this time at home to tackle some of the important financial projects that are so often put off. As businesses use this pause to rethink their strategy to position themselves for better growth and profitability, individuals and families can do the same to ensure that post-pandemic they too are in a stronger position. strong.

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