Investors are experiencing an unnaturally profitable period. The S&P 500 index has gained about 18 percent so far in 2021. And, as a reminder, this follows a similar 18 percent return in 2020 and the 30 percent surge in 2019. That’s over 80 percent in less than three years. After such a run, prudence really should be the order of the day.

With this run in stocks — and, let’s be honest, it feels inexplicable amidst such economic upheaval — now is a wise time to review your investment portfolio within the context of your longer-term plan. Every so often, it’s smart to take a step back and formally assess where things currently stand relative to your original plan.

There are only a few truly important rules to follow in investing. Beyond proper diversification and sticking with low-cost investments, the most important factor is asset allocation.

To review, the concept of asset allocation is about finding the right mix between riskier and steadier investments. Studies have shown that your portfolio’s allocation between stocks and bonds, not your individual selections, explains the vast majority of your portfolio’s return.

Do you know your portfolio’s current asset allocation? If not, that’s a good place to start your review. You might be surprised by how much your portfolio has drifted away from your original asset allocation target. Admittedly, rebalancing in the face of possible capital gains taxes can be a difficult and delicate task. But, it’s always best to focus on the dog (your portfolio), not the tail (your tax bill.)

Next is really knowing your life’s costs. If you want, you can call this your budget. I prefer to refer to it as your living cost summary. The word “budget” just has such a restrictive ring to it. On the other hand, your living cost summary is a comprehensive tally of where you’re choosing to spend your money. That sounds easier to stomach.

Do you know the cost of your lifestyle? Having created retirement-readiness models for over two decades, I can assure you that your spending habits will make or break your plan. Of course, as opposed to banking on a higher level of investment returns, your spending is the far more controllable and predictable piece of the puzzle.

Developing a formal retirement income model shouldn’t be seen as rocket science or feel overly painful. Thanks to today’s sophisticated financial planning software, these models have become more robust, flexible and useful over the years. At its very core, though, it’s still all about comparing your income and expenses, year-by-year, and then projecting things out over many decades and over many possible future scenarios.

Your formal financial plan really is the baseline against which all things should be measured. It’s at times like these, when markets seem too good to last, recalibrating both your portfolio’s asset allocation and assessing your spending against your original plan should move up your list of priorities. It might even allow you to overcome your natural sense of complacency just when things appear so unnaturally easy!

Jason P. Tank, CFA, CFP® is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at and at

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