When markets are volatile, it’s natural to pay closer attention to your investments. You may revisit your risk, check your progress and wonder whether anything in your financial plan needs to change. But what about when things are going well?
Recent Federal Reserve data showed that American household net worth reached a record high in the second quarter of this year, driven in large part by gains in stocks and other financial assets. For many investors, their financial picture may look considerably different today than it did even a year or two ago.
A growing portfolio is certainly something to appreciate, but it can also be a reason to revisit your broader financial plan. As investments appreciate and your net worth changes, you may find yourself with new risks, new planning opportunities, and, perhaps most importantly, new choices. The question becomes less about how much your portfolio has grown and more about what that growth means for the rest of your financial life.
Has Your Investment Risk Changed?
One of the easiest things to overlook during a strong market is how much your portfolio can change without you intentionally changing anything. An investment that performs particularly well can gradually become a much larger percentage of your overall portfolio. This can happen with company stock you’ve accumulated over the years, an individual holding that has appreciated substantially, or an area of the market that has simply outperformed others.
That growth isn’t necessarily a reason to sell, but it is a reason to ask whether your portfolio still reflects the level of risk you intended to take. Rebalancing, diversification, and your overall investment strategy should be considered in the context of your goals, timeline, and financial plan, not simply because an investment has performed well.
Has That Growth Created New Planning Opportunities?
A stronger financial position can create opportunities that go well beyond your investment portfolio. If you’re sitting on significant gains, for example, there may be tax considerations worth reviewing before making your next move. Depending on your circumstances, that could include deciding when to realize gains, coordinating investment decisions with other income, or exploring charitable giving strategies.
There may also be upcoming expenses or goals that now deserve another look. Perhaps you’ve been setting money aside for a major purchase, considering helping family, or thinking about a charitable gift. The return itself is only part of the story. What you choose to do with that growth, and how those decisions fit together, can be just as important.
Does This Change What’s Possible?
This may be the most important question of all. If your financial position has improved, does that change anything about what you’re able to do?
Maybe retirement could happen a little sooner than you originally expected. Perhaps you have more flexibility to help your children or grandchildren, increase your charitable giving, or finally take the trip you’ve been talking about for years. Or maybe nothing changes at all, and you simply have greater confidence that the plan you’ve built is on track.
The point isn’t to spend more simply because you have more. It’s to understand whether the wealth you’ve built has created choices that weren’t available to you before.
Does Your Financial Plan Still Reflect Where You Are Today?
A financial plan shouldn’t be something you create once and put on a shelf. Your investments change, your family changes, your priorities change, and, sometimes, your financial position changes considerably. That makes periods of financial success an important time to revisit the bigger picture.
Are you still on track for the same retirement date? Does your estate plan still reflect your wishes? Has your ability or desire to give changed? Are you carrying the appropriate amount of risk? Are there goals that once seemed out of reach that are now realistic? These are planning questions, not simply investment questions.
Make Sure Your Plan Grows With You
We spend a lot of time preparing for what could go wrong financially. But good planning should also account for what happens when things go right. If your portfolio has grown significantly, it may be worth taking another look at your plan to see whether that growth has created new opportunities for you and your family.
If your financial picture has changed and you’re wondering whether your plan should change with it, we’d be happy to start the conversation.
SRQ Wealth is a concierge wealth planning firm in Sarasota, Florida, helping families simplify their financial lives and find their freedom.
