As a young child – and the first born, my folks purchased a small house with two bedrooms and a single bath.  As the family grew, rooms were added one at a time.  Over the course of four more children, the second floor was expanded out over the kitchen’s flat roof; the side patio gave way to another bedroom; and on and on.  Today, it’s an interesting structure.  It works, but if they had it all to do over again – build a house from scratch, it would surely look very different.  It would be constructed to meet their needs today far more effectively and efficiently.

I see a lot of investment portfolios that have been built in much the same manner as my folk’s house.  They started out small, and as funds were added to them over the years, new securities were added like additions to a home.  Today, few of these cobbled together portfolios are especially effective or efficient – at least from a measurement of risk-to-return or the probability of meeting a specific set of objectives.

Fortunately, portfolios CAN be rebuilt from scratch.  It’s not like having to tear down a building.  Securities can be sold and replaced to create an appropriate asset allocation and achieve risk-minimizing diversification.  Of course, there can be obstacles.  One needs to take things like unrealized capital gains into consideration.

Unfortunately, my folks’ house wasn’t constructed with access for walkers and wheelchairs.  There’s an eight-inch drop from the living room to the dining room, and the stairs to the second floor could pose a challenge to even a skilled rock climber.  The house just doesn’t allow for the necessary modifications to meet their needs in old age.

Luckily, our portfolios can be relatively easily modified — and adjusted to address our needs both today and into the future.  And, like building a house, the earlier on we identify and address those future needs within the portfolio, the more likely it will be able to meet  them down the road.

So, if your portfolio’s been built over a number of years, now may be a good time to get a financial architect in to inspect both the structure and the materials, and to recommend any modifications – or even a complete renovation – that might give you  greater peace of mind that  it will be up to meeting those future financial needs when they do arrive.