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Spring Cleaning Your Investment Portfolio

29 March 2022

Much like your home, your investment portfolio requires regular maintenance to maximize its long-term value. Is it time to spring clean your portfolio? Here’s a to-do list. 

The concept of spring cleaning usually applies to areas of your home or workplace you may have forgotten about during the rest of the year. However, spring cleaning can also apply to your investment portfolio, especially in the wake of a highly volatile year marked by an enduring COVID-19 pandemic, the easing of fiscal stimulus and rising inflation.

These six tips will help you optimize your current investment objectives, better plan for retirement and ensure that you’re on track to reach your goals.

Review your investment goals

Your annual spring cleaning should begin by reviewing your financial situation and making any necessary changes to your investment objectives and risk profile. Important life events such as finding a new job, starting a family or accelerating your retirement plan can have important implications for your portfolio. By reviewing your investment goals, you can determine if you’re on the right track or if any changes need to be made.

Balance and Rebalance

Your portfolio’s asset allocation should reflect your risk tolerance and investment objectives. Regular rebalancing – annually, at a minimum – is extremely important since the value of your investment holdings change over time. For example, stocks may have become over-represented in your portfolio over the past year as equity markets rallied, while your fixed-income assets may have become under-represented due to the low interest rate environment. Rebalancing adjusts your portfolio’s asset allocation to keep it in line with your risk tolerance and investment objectives – and on track to achieve your financial goals.

Explore investment themes

Spring cleaning your portfolio also includes adding or subtracting certain investments. When considering which assets to add to your portfolio, it usually helps to look for themes. For example, do you believe that working from home will be a long-term trend? Are resource-heavy stocks a long-term play? Is demand for electric vehicles increasing? Answering these and other similar questions can help you position your investment portfolio around certain themes.

Organize account statements, transactions

It wouldn’t be a proper spring cleaning without organizing your account statements. Trade confirmations, interest and dividend payments and tax slips should all be organized and kept in one place. This makes tax preparation both quicker and easier. It can also help you stay organized if you decide to transfer your investments to another firm.

Think diversification. Think alternative assets

Although many investors agree that diversification is a necessary component of a well-balanced portfolio, they don’t always recognize the options available to them. In addition to stocks and bonds, alternative assets offer tremendous opportunities for investors, especially in the current economic and financial climate. Case in point: alternative assets under management reached $10 trillion in 2020, having grown 55% over the past seven years.[1]

Mortgages are one of the fastest-growing segments of the alternative asset market. In Canada, mortgage investments are classified as fixed-income assets. They can provide investors with steady cash flow through the payment of interest and fees. They can also provide investors with direct exposure to the real estate market without the risk of property ownership or title transfer. For most investors, a Mortgage Investment Corporation (MIC) is the easiest way to access mortgage investments in Canada. The CMI MIC Funds provide RRSP, RRIF, RESP, RDSP, LIRA and TFSA eligible mortgage investments that are suited to various risk profiles.

Speak with an advisor

In the age of do-it-yourself investing, investors often forget that there are qualified financial advisors who can help them along the way. Your annual spring cleaning could be a perfect time to speak with an advisor about how to optimize your portfolio strategy and make sure you’re fully prepared for the year ahead. Advisors can provide recommendations on how to best achieve your investment goals while factoring in retirement, tax planning and other important considerations.

To learn more about the CMI MIC Funds and how they can add value to your investment portfolio, contact us for a free consultation.

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