How to do an in-depth portfolio review with these 8 steps
If you’d like to do a thorough review of your portfolio and plan, here are the key steps to take. I recommend doing them over a series of sessions, not all at once.
Step 1: Gather your documentation
This could be your current investment statements, plus Social Security and pension. Pro tip: Set up a My Social Security account to get an overview of your benefits and earnings history.
Step 2: Ask and answer: How am I doing?
To find out if you’re on track to reach your financial goals, review your current portfolio balance, combined with your savings rate. Tally your contributions across all accounts. A decent baseline savings rate is 15%, but higher-income folks will want to aim for 20% or more.
Also factor in other goals you’d like to achieve, such as college funding or a home down payment. Are they realistic? Make sure you’re not giving short shrift to retirement.
If you’re retired or about to be, the key gauge of the viability of your total plan is your withdrawal rate—your planned portfolio withdrawals divided by your total portfolio balance. The 4% guideline is a good starting point, but aim for less if you can.
Step 3: Check up on your long-term asset allocation
Does your total portfolio’s mix of stocks, bonds, and cash match your targets? High-quality target-date series such as those from Vanguard and BlackRock’s LifePath Index Series can help benchmark asset allocation. My model portfolios can also help.
A portfolio that tilts mostly or even entirely toward stocks makes sense for younger investors.
If your portfolio is notably equity-heavy and you’re within 10 years of retirement, shifting to bonds and cash is more urgent. Just mind the tax consequences when you rebalance.
Step 4: Assess liquid reserves
Holding some cash is crucial to ensure you don’t have to tap your investments or resort to credit cards in a financial crunch.
For retired people, I recommend holding six months to two years worth of portfolio withdrawals in cash investments.
For those still working, holding three to six months’ worth of living expenses in cash is a good starting point.
Step 5: Assess suballocations, sector positioning, and holdings
Your broad asset-class exposure largely determines how your portfolio behaves. But your positioning within each asset class also deserves a look. Market strength has recently broadened, but growth stocks and funds that own them have outpaced value by a wide margin over the past decade.
Finally, check up on your sector positioning, allocation to foreign stocks, and actual holdings.
Step 6: Identify opportunities to streamline
Why have scores of accounts and holdings if a more compact portfolio could do the job just as well?
If you’ve changed jobs, you may have multiple 401(k)s and rollover IRAs.
Consider consolidating into a single IRA. If you have several small cash accounts, you may be losing out on a (slightly) higher yield.
Could you reduce the number of holdings in your portfolios? Index funds and ETFs provide pure asset-class exposure and a lot of diversification in a single package. I also like target-date funds for smaller accounts to provide diversification without any maintenance obligations.
Step 7: Manage for tax efficiency
At this point, if you think changes are in order, be sure to take tax and transaction costs into account. Focus any selling in your tax-sheltered accounts, where you won’t incur tax costs and you can usually avoid transaction costs, too. Within your taxable accounts, review the tax implications and/or get tax advice before executing trades.
Also review whether you’re managing your portfolio with an eye toward tax efficiency. Are you making contributions to your tax-sheltered vehicles? Are your taxable accounts as tax-efficient as possible? For a lot of people, this is as simple as holding equity ETFs and/or municipal bonds and bond funds for their taxable accounts. Finally, think about tax-efficient withdrawal sequencing.
Step 8: Troubleshoot other risk factors
Uninsured long-term-care risk is a significant factor for those who are neither well off nor eligible for Medicaid. Develop a plan in case you have sizable long-term-care outlays later in life.
Another common risk factor is providing help to loved ones. In this case, it’s often helpful to talk to a financial advisor and/or estate planner to figure out how you can help without jeopardizing your financial future.
This article was provided to The Associated Press by Morningstar. For more personal finance content, go to https://www.morningstar.com/personal-finance.
Christine Benz is director of personal finance and retirement planning for Morningstar.
Related Links
- 5 Smart Ways to Diversify Your Portfolio for 2026
https://www.morningstar.com/portfolios/5-smart-ways-diversify-your-portfolio-2026 - 8 Reasons You Might Need to Tweak Your Portfolio
https://www.morningstar.com/portfolios/8-reasons-you-might-need-tweak-your-portfolio - An Investing Guide for Every Life Stage
https://www.morningstar.com/personal-finance/an-investing-guide-every-life-stage
—Christine Benz of Morningstar