Setting Investment Goals and Reviewing Targets

target-date1David Fabian:  The mid-point of any year is a great time to review your investment goals and targets.  Each investor should soon be receiving their monthly or quarterly statement from their broker.  This key document lists your individual positions and account values.  It also allows you to review your cost basis, gain/loss, and overall asset allocation.

I encourage everyone to take 30-minutes out of their day to review this information.  It doesn’t matter if you have been following the markets tick by tick or haven’t looked at anything since 2015.  There are always tidbits that you can pick up that may prompt worthwhile adjustments.  Examples may include the decision to sell an under performing fund, re-balance your holdings, or simply deploy additional capital.

Also take the time to calculate your 2016 total return on a year-to-date basis (net of any additions or withdrawals).  I always recommend investors have a consistent and reasonable goal that they are striving to achieve each year.  It doesn’t matter if your goal is 4% or 24%, you should at least be able to compare your actual progress versus your expected outcome to see if you are on track.

You won’t always hit your goal perfectly on the nose each year.  Returns are never that linear or predictable.  However, having a goal can help maintain a balanced perspective and ensure your portfolio is being properly managed to your objective.

I would bet that most conservative investors who are over-allocated to fixed-income are exceeding their goals this year.  Conversely, traditional growth-minded investors may find themselves coming up short as the volatility in stocks has stymied returns.  Consider that the SPDR S&P 500 ETF (NYSEARCA:SPY) is +4.04% in total return so far this year versus the iShares Core U.S. Aggregate Bond ETF (NYSEARCA:AGG) at +5.53%.

It’s also worth noting how you have navigated the markets over the last six to twelve months.  Review your number of trades and whether those changes have added or detracted value from your efforts.  Did you make any big mistakes that were born out of emotion rather than discipline?  Are there any lessons to be learned from the process versus the outcome?

The tricky part moving forward is for those who have done well to avoid becoming overly emboldened by their recent success.  The market loves to humble the best of us and assuming that all trends currently in place will extend indefinitely can be a foolhardy mindset.

Furthermore, its critical for those who may have fallen behind their expectations to avoid becoming overly pessimistic.  This can result in the urge to make drastic changes to try and “catch up”.  Every strategy is going to be encumbered by periods of weaker than expected returns. 

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