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3 Easy Steps to Conduct a Year-End Portfolio Review

2018 has been a roller coaster of a ride for investors.

The year started strong with stocks surging early. However, as news of trade conflicts rolled in and with the Fed raising interest rates, stocks started to decline – most notably in February, October and now in December.

With the festive season underway, it is tempting to put off doing a portfolio review till next year. But given what the stock markets may have done to your portfolio this year, it is worth taking a little time to do a quick check-up of your portfolio. Here, I have compiled a quick checklist on doing a portfolio review to prepare ourselves for the new year.

Stock allocation review

Considering how volatile markets have been this year, it is not uncommon to see some stocks depreciate more than 20%. For instance, I have two stocks in my portfolio that experienced more than 30% losses (Nvidia and Tencent). It may, therefore, be useful to do a quick check on how changes in stock prices affected your overall portfolio allocation.

If you are still confident of the long-term performance of your poor-performing stocks, now may be a good time to increase the allocation of these stocks so that it is in line with your other holdings.

After their share price declines, my Nvidia and Tencent allocations are below my average stock holdings. As such, I intend to add more shares of both these companies into my portfolio. Besides averaging my purchase price down, adding more stocks will also bring these stock allocation up to my average allocation size.

Likewise, if you are lucky enough to have a stock appreciate dramatically this year, it may be worth considering selling some stock to rebalance your portfolio.

Review individual holdings

In addition to rebalancing your stock allocation, it is also an excellent time to review each stock holding. Does your investment thesis still hold true? Have global events impacted the long-term profitability of the business?

It is also important to assess its current valuations. Have valuations increased out of sync with its earnings?

Another question I occasionally like to ask myself is, “Would I still buy the stock now if I did not already own it?” If the answer is no, then it may be time to relook at your position and to assess if your money is better off in another company.

Review your financial targets

Finally, the end of the year is a great time to check whether you are on track to achieve your long-term financial goals. It is also a time to relook your goals and to add new goals for the new year.

If you are an accumulator who is saving for retirement, is the year-end value of your portfolio up to the target you had hoped to achieve? Did you manage to save and invest enough each month?

Our goals and financial requirement may also have changed over the course of the year. If you would be earning more next year, it may be appropriate to save a larger chunk of your income. Other personal factors such as saving for your child’s university education may also impact your financial goals. Thinking about what our financial requirements are and the timeline we have to achieve is vital in setting yearly goals.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia owns shares in NVIDIA Corporation and Tencent Holdings Ltd. The Motley Fool Singapore has buy recommendations for NVIDIA Corporation and Tencent Holdings Ltd.