Table of contents
The halfway point of the year is a valuable moment to pause and reflect. For disciplined savers approaching or entering retirement, a mid-year review can be a powerful way to ensure your investment portfolio still supports your financial goals.
Markets shift. Needs evolve. A thoughtful check-in helps keep your strategy aligned with where you are today and where you want to go.
Why mid-year rebalancing matters
As markets rise or fall, your original mix of stocks, bonds, and cash may start to drift off course. Rebalancing helps correct that.
Here’s why it’s smart to assess your portfolio now:
- Course corrections: If stocks have surged, you might be holding more equity exposure than intended. Rebalancing brings your portfolio back to its target allocation.
- Tax planning opportunities: Mid-year is early enough to act on tax strategies such as tax-loss harvesting. Adjustments made now can help you avoid rushing in December.
- Updated life goals: Your priorities or income needs may have shifted in the past six months. This is a good time to make sure your investments still reflect your plan.
Linking investment strategy to risk tolerance
Retirement isn’t about exiting the market—it’s about engaging with it differently.
To align your portfolio with your needs, consider these three steps:
- Check your current allocation: How close is your actual mix to your intended target? Even small changes over time can leave you exposed to unnecessary risk.
- Reassess risk tolerance: Your willingness to weather volatility may change as retirement approaches. The SEC defines risk tolerance as both your ability and your willingness to lose some or all of your original investment in pursuit of greater returns. Now is the time to ask yourself if your current allocation still fits.
- Clarify your retirement goals: Whether you want to generate steady income, fund travel, leave a legacy, or prepare for healthcare costs, your goals should shape your portfolio.
A five-step guide to rebalancing
If you’re ready to evaluate your portfolio, follow these steps to make smart, strategic changes:
- Review performance: Start with a six-month lookback. Where have your investments outpaced expectations? Where have they underperformed?
- Compare to your target mix: Measure your actual allocations against your strategy. Are you too heavy in equities? Too light in cash?
- Adjust holdings: Realign by selling assets that are overweight and buying those that are underweight. For example, if stocks are now 75% of your portfolio but your target is 60%, consider shifting some gains into bonds or cash.
- Consider the tax impact: Rebalancing in taxable accounts may create capital gains. But mid-year gives you more flexibility. Strategies like tax-loss harvesting may help reduce your liability. The IRS recommends periodic reviews to maximize retirement savings and manage tax outcomes.
- Document the changes: Keep a written record of what you adjusted and why. This helps when working with your financial advisor or preparing next year’s taxes.
Keep diversification at the core
Diversification spreads risk across different types of investments. It prevents any one area of the market from having an outsized impact on your financial health. For instance, if your portfolio is heavily weighted toward tech stocks and that sector experiences a sharp downturn, your overall retirement income could suffer—regardless of how well other areas of the market are doing.
Rebalancing is what keeps your diversification intact. Without it, you could become too concentrated in a single asset class without realizing it.
As the SEC explains, asset allocation—dividing your portfolio among stocks, bonds, and cash—is essential to long-term investing success.
Consider getting a professional perspective
Even the most seasoned investors benefit from a second opinion. A trusted financial advisor can:
- Evaluate your current strategy
- Suggest ways to improve tax efficiency
- Help define or refine your retirement goals
- Offer personalized strategies based on market conditions and your individual priorities
Many of our clients here in Arizona appreciate having a local partner who understands the financial realities of retirement in the Southwest. Whether you’re downsizing, planning summer travel to escape the heat, or staying close to home, your plan should reflect what matters most to you.
Final thought: Stay focused and forward-looking
Mid-year reviews aren’t just about numbers. They’re about clarity. By taking time now to review your portfolio, you set yourself up for smoother sailing in the second half of the year—and stronger confidence in the years to come.
Stay proactive. Stay aligned. And remember that small adjustments today can make a big difference tomorrow.
