New You. New Goals. But still the same old investment portfolio?
As time passes, many situations in your life can change. You could move jobs, get a raise, buy a car, get promoted and so many other things. When these things change, your investing goals need to adapt along with them.
People say: “Old keys can’t open new doors,” so you should approach investing differently if you have a new set of goals to reach. That means you need to tweak your portfolio, too. If you need to know just what to do when your investing goals change, read on.
Check the change
To start, find out why the change is happening. You’ll need to know if it will keep affecting your situation (in which case, you may have to wait until it stabilizes) or if it was a one-off. For example, the change from adding another task to your freelance work (where your income depends on how many jobs actually come in) would be different from what you’d get from a raise or promotion.
Once you know the nature of the change, see how it affects the amount you need for your goal. Will it be smaller or bigger? For one-time use or will you need it to come in on a regular basis? You should also find out if the change impacts your investment horizon.
Look at your situation
If the change means that your income will go up, your investment rate should rise as well, because it is good to invest a certain percentage of your monthly income.
Don’t forget to also look at your money management. Even when you have an investment portfolio, you should have the discipline to control your expenses so you can keep on saving (70:30 is a good spending-to-saving/investing ratio).
If your income is going down or you can’t avoid new or higher expenses, you’ll have to see how these will affect your portfolio. Adding new investments or topping up the ones you already have might not be a good idea, in this case.
Assess and take action
Take a good look at your portfolio. Which of the investment products can meet your new goal? Are there any investments that won’t help you reach it? What new products can you afford to get that can help you get to where you want? Are there more affordable alternatives? Research new products in the market.
Once you know all these, you can go ahead and tweak your portfolio, making sure everything is aligned with your new goal.
One thing to remember: If you must, then redo your portfolio from scratch. While painstaking, that would still be better than keeping existing investment products that will not help you reach your new goal.
