Your Annual Investing Checkup--In 5 Painless Steps

Allison Kade

NEW YORK (Learnvest) —There are certain things that we just need to do every so often: Car tune-ups. Cleaning out the gutters come spring. Regular visits to the doctor. And, you guessed it, investment portfolio check-ins.

LearnVest certified financial planner™ Ellen Derrick likes the metaphor of a trip to the pediatrician as a kid: Rather than view your investments as a grueling task that requires tackling, think of it as a friendly checkup instead. You’ll get in and out—and if you’re especially good, maybe you’ll even get a lollipop.

In the same way that a physician would take you step-by-step through a yearly physical, we asked Derrick to walk us through the basics of an annual investing checkup.

1. Look at the Big Picture

One of the first things that your doctor will do is assess your basic health, including your blood pressure, temperature and weight. “In investing terms,” Derrick says, “this would be the equivalent of taking a snapshot of your overall picture. Has your income or job changed? Has your family grown or shrunken?”

The first step in your investing checkup is to think about how your situation and goals have changed—and what that means for your portfolio.For example, Derrick says, “If you’re now making more money than you were last year, perhaps you should increase your monthly retirement savings accordingly.”

2. Address Lingering Problems

Next, your doctor will probably ask about specific health concerns. You can do the same for your portfolio by looking for investment red flags. “If you invested in a fund or a stock that hasn’t performed well,” Derrick says, “ask yourself whether it’s a symptom of a bigger problem or just a temporary flare-up.” If you had money to invest today, would you consider buying the same investment? If the answer is no, she says, then perhaps you should consider taking the loss and moving on to something else.