Wrap Up the Year by Reviewing Your Portfolio

As we approach the end of 2024, it's time to reflect on the year and prepare for the year ahead. One of the most essential financial tasks during this period is to review your investment portfolio. For NRIs in Singapore, this review is crucial for making informed decisions about your financial future. Whether you’re managing investments in India or Singapore, conducting a portfolio review can help you stay on track to meet your long-term goals.

The Importance of Portfolio Review

A portfolio review is not just about checking how your investments have performed. It’s an opportunity to assess whether your asset allocation still aligns with your financial objectives, risk appetite, and evolving life circumstances. In Singapore, where many NRIs have made their home and may be balancing investments in India and other markets, regular reviews are particularly important to ensure that your portfolio is well-positioned to meet your needs in the future.

For many NRIs, the investment strategy may shift over time—whether due to a change in family circumstances, career goals, or even the state of global markets. You might have started investing with a focus on wealth accumulation, but now, as you approach retirement, your focus may have shifted towards wealth preservation and income generation. Regularly reviewing your portfolio ensures that your investments are working towards your goals, and not just based on the previous year’s market performance.

Step 1: Assessing Your Investment Performance

To begin your portfolio review, start by evaluating the performance of each asset class in your portfolio:

1. Equities and Equity Funds (India and Global Markets)If you’ve invested in Indian stocks or equity mutual funds, take the time to look at how these investments have performed over the year. While equities are known for their growth potential, they also come with volatility. If the markets have been volatile, it’s essential to determine if your portfolio has remained resilient. Have the equities you own met your expected returns over the long term? Have you maintained a diversified equity portfolio, or are you too concentrated in specific sectors? A balanced equity allocation helps spread risk, especially when investing across both the Indian and global markets.

2. Fixed Income Investments (Bonds, FDs, REITs)Many NRIs in Singapore prefer fixed-income investments like bonds, fixed deposits, and REITs (Real Estate Investment Trusts), which provide a steady income stream. Take stock of how these investments have performed. Have your bonds or fixed deposits given you the expected return relative to the interest rates available? Singapore is home to a robust REIT market that offers good diversification and relatively stable yields, so review how these investments have performed. Are they providing the level of income you anticipated, or could there be a more efficient way to use that capital?

3. Real EstateIf you’ve invested in property, either in Singapore or back in India, assess the current value and income potential of these properties. Are they generating consistent rental income, and have their values appreciated as expected? Many NRIs own property in India as a long-term investment or as a part of their retirement planning strategy. In Singapore, properties like residential units, office spaces, and commercial investments can also play a key role in a portfolio, especially as part of a diversified investment strategy.

4. Global DiversificationDon’t forget about global diversification. Singapore offers several investment opportunities in international markets, such as global ETFs, funds, and equities. It’s crucial to ensure that your portfolio isn’t overly reliant on one market, such as India. Diversifying across multiple regions, including developed markets like the U.S. or Europe, and emerging markets in Southeast Asia, can help reduce risk and smooth out volatility. Diversification is an important hedge against currency fluctuations, market downturns, or geopolitical instability.
   

Step 2: Rebalance Your Portfolio

One of the main benefits of reviewing your portfolio is that it gives you an opportunity to rebalance. Over time, certain investments may have performed better than others, and your portfolio might have become unbalanced. For example, if equities performed particularly well, you might find that your equity exposure is higher than you initially intended. Conversely, if fixed income investments haven’t kept pace with inflation, you may want to shift some of those funds into higher-growth investments.

In Singapore, where you have access to a wide range of investment products, consider rebalancing by increasing allocations to assets that align with your current financial goals. If you’re looking for growth, you might want to invest more in equities or funds with exposure to sectors like technology or healthcare. On the other hand, if you're nearing retirement, you may prefer shifting funds toward more stable income-generating assets, such as REITs or bonds.

Step 3: Consider Your Changing Financial Goals

Your financial goals may evolve as your life circumstances change. If you're a young professional, your primary objective might be capital growth and wealth accumulation. However, as you approach major milestones—like buying a home, funding your children’s education, or preparing for retirement—your financial goals will become more nuanced. At this stage, you may want to place more focus on building a stable income stream or protecting the wealth you’ve accumulated.

If you’re an NRI planning to retire in Singapore, now is the time to shift your portfolio toward low-risk, income-generating investments. If you have a family back in India and want to ensure their future, consider how your portfolio can support those long-term needs.

Step 4: Review Your Tax Efficiency

While we’re not delving into specific tax advice, it’s important to think about the tax efficiency of your portfolio. As an NRI living in Singapore, you benefit from a tax-friendly environment with no capital gains tax on your investments. However, it’s still vital to ensure that your investments are structured in a way that maximizes after-tax returns. For instance, if you’re investing in equities or REITs in Singapore, make sure you’re aware of the withholding taxes on dividend income. Similarly, if you have investments in India, it’s important to understand the tax implications of those investments, as you may need to file taxes in both jurisdictions.

Reviewing your tax-efficient investment strategies now will help you make better decisions for the year ahead and ensure your wealth continues to grow in a tax-optimized way.

Step 5: Focus on Risk Management

A key element of your portfolio review should also be a focus on risk management. In a dynamic global market, risk is an unavoidable part of investing. However, it’s important to evaluate whether your portfolio is exposed to risks that are outside your risk tolerance. This could include market volatility, geopolitical risks, or currency fluctuations.

For example, if you’ve invested heavily in a single currency or asset class (like Indian equities), you may be exposed to higher risk. Consider diversifying across multiple asset classes, including international stocks, bonds, and REITs. In addition, having the right level of insurance coverage and an emergency fund can also serve as a safeguard against unforeseen financial challenges.

Conclusion: Make Your Review a Priority

Wrapping up the year by reviewing your portfolio is a step that every NRI should prioritize. It’s a critical exercise to ensure that your investments are working for you, aligning with your current financial objectives, and positioned to meet your future goals. By assessing performance, rebalancing, and adjusting your strategy as needed, you can make the most of your investments and start 2025 on a strong footing.

As a financial advisor, I understand the unique challenges that NRIs in Singapore face when managing portfolios across multiple countries. My approach focuses on empowering clients with clear, actionable strategies that not only optimize returns but also safeguard their financial future. If you haven’t already conducted a portfolio review, now is the time to do so. It’s a proactive step that will help you manage your wealth and ensure that you’re on the right track to meet your long-term financial goals.

Note: This is the first of several blog posts to come. Stay tuned for more expert advice on how to optimize your financial journey, manage your investments, and prepare for a prosperous 2025.