Mid-year financial review: Essential steps for Hong Kong investors to stay on track

The season of scorching heat has dawned on Hong Kong once again, which means we are now into the depths of summer and halfway through the year. As the year progresses, it's crucial to take stock of our financial situation. A mid-year financial review allows us  to assess our progress, identify potential roadblocks, and make necessary adjustments to help us get closer to our goals. 

Regular portfolio reviews exemplify the importance of strategic asset allocation for long-term success in your personal wealth management journey.

Importance of mid-year financial reviews

A mid-year review provides a timely opportunity to evaluate our financial goals and ensure we are are on track. It is a chance to:

• Analyse our income, expenses, and investment performance to-date.
• Identify areas that may need attention or course corrections.
• Adjust our strategy based on changing circumstances or market conditions.

Who needs a mid-year financial review?

For those with specific financial goals

A mid-year financial review is highly recommended for individuals who have set specific financial goals, such as saving for a home, kids' education, an emergency fund, or the future. Taking stock at the mid-point allows us to assess our progress and make necessary adjustments to stay on track. If our savings or investments are lagging behind, we can course-correct by increasing contributions, reviewing your asset allocation where it makes sense, or lowering our overall expenditure. If you do not have a set-in-place financial plan, learn more here.

For people planning their finances across life stages

Conducting a mid-year financial review is beneficial for people across different life stages. Those in their 20s and 30s can focus on long-term investments and retirement planning, while the “sandwich generation” in their 40s and 50s have more to consider, including their children’s needs, ageing parents, as well as their own retirement planning.

As retirement nears in the late 50s and 60s, a comprehensive review helps finalise decumulation strategies and ensure your withdrawal rates align with your life expectancy and market conditions. Even during retirement, periodic reviews are crucial to preserve wealth through lower-risk assets.

When markets seem unstable

Uncertain market conditions, like the volatility witnessed this year due to rising interest rates, inflation, and geopolitical tensions, further incentivise the need for a mid-year financial review. This is not a call to react hastily, but rather an opportunity to assess and evaluate your financial strategies with a thoughtful approach.

Step-by-step guide to mid-year financial review

Step 1: Quick wellness check

Review your goals to ensure they align with your financial aspirations, horizons and life stage. 

What are your short-, medium-, and long-term saving and investment goals? Are you on track for your financial goals with your current lifestyle? 

Consider if you are saving enough for retirement and other important life milestones, such as buying a home, funding your children's education, or building an emergency fund. By monitoring your goals and progress, you can ensure that you are well-prepared for the future.

Step 2: Measure the adequacy of cash reserves

Having a sufficient emergency fund acts as a safety net to protect yourself against unexpected events like job loss, medical bills or other financial uncertainties. 

This emergency fund reserve should generally cover 3-6 months' worth of essential expenses, allowing you to weather temporary setbacks without jeopardising your long-term goals. For cash sitting idle, depending on your investment objectives and risk tolerance, consider our CashUp Portfolios as liquid cash management options to grow your cash without compromising flexibility when funds are needed.

Step 3: Review your holistic wealth situation 

Review your portfolio mix / asset allocation

Review the breakdown of your investment portfolio in totality. Assess if your current asset allocation aligns with your risk tolerance and goals. An imbalanced portfolio can expose you to unnecessary risks or limit potential returns.

Rebalance as needed

If your asset allocation has drifted significantly from your targets, consider rebalancing. Rebalancing helps maintain your desired risk profile while keeping your portfolio on track.

The auto-rebalancing feature on Endowus is one of our value-added, embedded services for clients. We do not charge any switching costs so you can stick to your target asset allocation aligned with your risk appetite — while maintaining a total view of all your finances in one platform. 

Examine the extent of diversification of your portfolio

Nobel prize-winning economist Harry Markowitz called diversification "the only free lunch in finance". Diversification across asset classes, industries, and regions can reduce portfolio volatility, thus achieving better risk management. 

Step 4: Review your debt situation

Review all your outstanding loans, credit card balances and other debts, especially those that you are obliged to pay off from mid-year onwards. Based on your income and expenses, you should:

1. formulate a realistic payment plan to tackle your debts systematically; 
2. prioritise paying off high-interest debt first, and;
3. automate debt payments to help you stay on track

Step 5: Re-evaluate your plan

Evaluate how well you have achieved your financial goals up to this point. Identify areas that need improvement or adjustment. Life circumstances like job changes, family events or major purchases can impact your plan, requiring realignment. 

During the review, assess if your investment portfolio and asset allocations are still appropriate for your goals’ timelines.

For instance, approaching retirement may warrant reducing risk by shifting to lower-risk investments and the inflation rate and interest rates could be the factors that trigger a re-evaluation of plans. 

Step 6: Make necessary adjustments, with help if you need

If you find yourself falling behind on your goals, take a closer look at the reasons behind it. 

Was it due to habitual reasons or were the plans not actionable and sustainable to begin with? Understanding the root causes will empower you to make necessary adjustments.

Fortunately, there are options available to help you get back on track. Subject to your investment objectives and risk tolerance, Consider increasing your investment contributions to accelerate your progress. Deliberate on delaying major expenses to free up resources for your goals. And if needed, be open to revising timelines to ensure a more achievable and realistic path.

What can Endowus do for you? 

By now, you should have the tools to conduct a comprehensive mid-year financial review. By the steps outlined above, you can gain clarity on your financial position, identify any issues or shortfalls, and make any necessary adjustments to get your finances on track for the remainder of the year.

Here at Endowus, we operate on an independent, no-commission basis, allowing us to always put you first.

Click here to get started on your wealth journey on Endowus Hong Kong or schedule a free 1-on-1 consultation with our SFC licensed advisors today.

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