MAKE INVESTMENT CHANGES THOUGHTFULLY

Every airplane owner is familiar with the annual inspection. Required by the FAA to promote safety, every airplane must be taken annually to a qualified shop to be inspected. The procedure is quite involved, and can be a little discomforting when viewed for the first time.
 
During the process the shop essentially opens the whole machine up to take a look inside. The goal is to basically inspect every piece of the airplane to assure it complies with very strict guidelines. Some parts are repaired or replaced based on standards of wear and others simply because their stated useful life is up. The idea being that parts should be replaced before they fail because a pilot does not have the convenience of being able to call a tow truck if a fuel pump gives out in flight.
 
All of this abundance of caution with airplanes comes at a cost. Annuals are expensive, and so are those brakes and tires and miscellaneous parts that are replaced when they still have life left in them. Additionally, there is an inherent risk in taking apart something so complex and then putting it back together again, because mistakes are sometimes made. The challenge for the shop, the owner and the FAA is to balance the risk and cost of inspecting and replacing parts, against the risk of not doing so.
 
An investment portfolio can also be very complex. Created over many years, a retiree may have a multitude of intertwined investments, each performing a different and hopefully complimentary role in the total retirement plan. These accounts, like an airplane, need regular service to keep them running properly, but the very act of servicing them can create its own additional problems. 
 
An area of concern is when someone has a major life change. A death, sickness, marriage, divorce, or other event can lead to advice to make sweeping changes in the portfolio mix. Although ongoing financial tune-ups are appropriate, making extreme investment changes all at once can be unnecessary and expensive. As with an airplane, sometimes the risk of replacing a working part is higher than the risk of leaving it alone.
 
I am thankful the FAA requires an annual inspection of my airplane, even if I don’t like paying for it. I am also thankful for the great relationship I have with my shop. After the annual inspection they call to discuss with me those repairs that are safety related, those that are desirable but not necessary, and those that are merely cosmetic. They often recommend that in some of the latter two it is safer to just leave things alone.
 
Before making major changes to your portfolio, make sure you understand the difference between what is necessary, and what may be merely cosmetic. Doing a full rebuild can be costly and unnecessary, for both an airplane and your portfolio.