The closer you get to your plan, the safer you become

Every life endeavour requires commitment and time, as nobody has achieved greatness by just watching from the sidelines. This is also applicable in management of our retirement plan, even when we hand it over to fund managers; it is only advisable that occasionally, we get closer to know what is happening.

Experts say it is only the person on ground that can raise objection when a wrong decision is taken on his behalf; so, the closer you get to your plan, the safer it is for you, because there you have the opportunity to take certain decisions.

Experts call it portfolio Check-up. Fine, to them, good retirement investing doesn't have to be a high-maintenance affair, after all, while some people enjoy following the daily ups and downs of their holdings, others do not want the heartburn- or just do not care to spend that much time on something that does not require it.

But again, while there's no such thing as a truly hands-off retirement portfolio-- unless you've put your whole nest egg into a lifecycle fund, which has some drawbacks- investing well need not be complicated.

Therefore, if it has been a while since you've looked at your holdings, take a little time now to give your portfolio this simple checkup. A checkup like this every year or so, together with the occasional update as events warrant, will help keep you solidly on course toward your retirement goals.

What to do?

Review your allocation
It is important, you regularly review your asset allocation plan to really ascertain which assets you still hold or sell. It is possible that the class of asset you held since one or two years ago is today a must-sell to be safe; therefore, the earlier you notice this and take decision on it, the better for you. It is also possible that the asset allocation tool that determined your risk tolerance and told you what kinds of investments to hold more than a year or two ago, has changed, so you also need to change.

Rebalance your portfolio
Even if your target asset allocation has not changed, your portfolio has probably drifted from your original allocation. That is because different asset classes perform differently, and that 5 percent you allocated to a hot stock may have become 11 percent of your portfolio. There is no need to keep strictly to your desired allocation, and in fact, doing so can be detrimental- if a stock or fund is outperforming now, let it run! However, as a general rule of thumb, if things have drifted more than 5 percent away from your target allocation, it's time to rebalance. You may find you only need to rebalance once every two or three years.

Check for tax efficiency
If your retirement portfolio includes investments in taxable accounts, now is a good time to make sure your holdings are arranged in a tax-efficient way across accounts. This is not something you will need to do every year, but it is easier to do while you have everything in front of you. Best of luck.

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