As I write this post, the markets have mostly recovered from the downturn at the beginning of the year, international stocks are up significantly, and the Big Beautiful Bill (BBB) was signed into law. Oh, and, it’s July—helloooo summer! In short, things are pretty quiet, both in the markets and around the office.
Quiet is good. Hopefully it means you’re enjoying the fruits of your labor by spending quality time with family and friends and looking forward to savoring new (or familiar) summertime adventures. I certainly am. (If anyone knows of any can’t-miss hotspots along the Maine coast, I’m all ears!)
Quiet times like these offer a welcome break from the hypervigilance provoked by turbulent times. But calm periods are good for more than that. In fact, it’s the perfect time for an annual portfolio evaluation and refresh.
Calm Times Mean Clear Minds
This might sound obvious, but it’s much easier to look at your financial future with some perspective when it doesn’t feel like everything around you is on fire.
In times of calm, people are able to see the big picture more clearly. They can focus on the present and consider the long-term consequences of their choices. This is in stark contrast to the type of thinking that occurs in volatile times, which is typically solely reactive. Making financial decisions with a reactive mindset puts you at the mercy of current conditions, and a tendency to focus on the short term only.
The bottom line: Calm presents you with a window of opportunity to make important decisions.
Take advantage of this environment to reassess where you’re going in your financial life. This includes:
- Reviewing your personal situation. Examine what’s changed in your life since you set up your portfolio. Determine how those changes might impact your spending needs, your accumulation goal, and your ability to save. Our lives change on a regular basis so it’s good to check in and then adjust your plan accordingly.
- Evaluating your portfolio. Make sure it’s in the right risk profile to meet your needs. For example, if your retirement projection says you need to earn a six percent return, make sure it’s still designed to generate that return — as opposed to looking at it when the markets are up or down and trying to figure out when to buy or to sell. If you’ve carefully evaluated your investments now, you’re more likely to stay the course through the difficult times, which is no easy feat.
- Adjusting your portfolio to leverage recent tax law changes. There are so many aspects of tax law that can change: income tax brackets, interest deductions, charitable contribution limits, Roth IRA or 401(k) plan contribution limits, etc. Consider how those changes might impact your upcoming life events. For example, homeowners in high tax states could see thousands in tax savings annually as a result of the increased SALT deduction that came out of the BBB. Maybe it’s time to reconsider that home purchase.
Revisiting and tying all these aspects together on an annual basis can be incredibly beneficial. Not only can it help you reach your financial goals sooner, but it also ensures you’re continuously reaching the right goals as your life changes.
So the next time you find yourself kicking back and enjoying the calm, resolve to take just a minute to reach out to your financial advisor and set up your annual financial review — after you watch that beautiful sunset, of course.
