Are You Asking the Right Questions in Your Portfolio Review? AI Can Help

Last week, I had an insightful conversation with my friends about financial planning. I remembered a story that my friend shared with us. His friend’s mother-in-law had bought an insurance policy seven years ago but hadn’t heard much from her advisor ever since. Recently, she was thrilled to learn that her policy had returned 40% over the years.

The Value of Looking Beyond Plain Returns

While this may sound like great return for many, for people like us who have an interest in investing, we know that a flat return percentage doesn’t give the whole picture. Instead, it’s important to evaluate these numbers in a more meaningful way—using metrics like the Compound Annual Growth Rate (CAGR) to provide context and clarity on actual growth. But how many consumers would have this sort of financial knowledge?

This conversation led us to a bigger question: When was the last time any of us really examined our portfolios? Most of us work hard to save and invest, but we often don’t know the right questions to ask when it’s time to evaluate how our investments are performing with our financial advisors. Even more importantly, few of us know how to measure whether our investments are helping us achieve our long-term goals, like financial independence or early retirement.

Why Educating Yourself is Essential

If you’re aiming to achieve financial independence or fast-track your retirement, you’ll want a solid understanding of how your portfolio is performing. Investing can feel complex, but taking the time to educate yourself on key metrics is well worth it. The more you know, the better positioned you’ll be to make decisions that align with your goals. Below, I’ve listed some of the most important metrics to consider when evaluating your portfolio.

I brought up the idea that people should consider using AI to help them prepare for portfolio reviews with their financial advisors. By having a conversation with an AI chatbot allows the chatbot to highlight the key metrics you need to know and guide you on the questions to ask your financial advisor to get more clarity about your investments.

In this article, I’ll break down the most important metrics to consider and show how AI could assist in creating a clearer path toward your financial goals.

Key Metrics and Topics to Discuss with Your Financial Advisor During Your Portfolio Review

Compound Annual Growth Rate (CAGR)

CAGR tells you the average annual growth rate of your portfolio over time, reflecting the compounding effect. It’s one of the best ways to measure performance because it gives a more realistic sense of how your investments are growing each year, compared to a simple, flat return.

Internal Rate of Return (IRR)

The IRR accounts for the timing of your cash flows, like contributions and withdrawals, giving you a true measure of your portfolio’s profitability. This is especially useful for those aiming to maximise their investments in a limited timeframe, as it reflects overall growth accurately.

Risk-Adjusted Return (Sharpe Ratio)

This metric tells you how much return you’re getting for each unit of risk taken. The higher the Sharpe Ratio, the better your portfolio is performing relative to its risk. If you’re focused on growth but also want stability, the Sharpe Ratio can help you evaluate whether your investments are providing good value for the level of risk involved.

Fee Transparency and Expense Ratios

Fees can significantly impact your long-term returns. When evaluating funds, pay attention to the expense ratios and any hidden fees associated with them. Lower fees can make a big difference over time, especially when compounded. If your focus is early retirement, minimising fees is an easy win that can accelerate your progress.

Asset Allocation Efficiency

For those looking to build wealth over the long term, asset allocation is crucial. Take a close look at how your portfolio is divided across asset classes, such as equities, bonds, and alternatives, to ensure it aligns with your risk tolerance and financial goals. Efficient allocation not only helps you grow your wealth but can also protect you during market downturns.

Diversification

Diversification helps reduce risk by spreading investments across different asset classes and geographies. A well-diversified portfolio can be more resilient to market fluctuations, which is particularly important if you’re planning to retire early or rely on your investments for long-term financial security.

Total Portfolio Value and Net Worth Growth

Tracking the overall growth of your portfolio value, as well as your net worth, is key to understanding your progress. By focusing on net worth growth over time, you can assess whether you’re moving closer to financial independence and how quickly you’ll reach your desired level of wealth.

Income-Generating Potential

If you’re looking at retirement in the near future, consider your portfolio’s ability to generate passive income through dividends, interest, or rental income. Ensuring a steady income stream is crucial to sustaining your lifestyle once you’ve retired and are no longer earning a salary.

Projected vs. Actual Returns

Were the returns you initially expected in line with what you’ve actually received? A comparison of projected vs. actual returns can help you evaluate whether your investments are meeting expectations or if you need to make adjustments to your strategy.

Portfolio Liquidity

If you’re aiming for early retirement or financial flexibility, consider the liquidity of your investments. Highly liquid assets can be quickly converted to cash if needed, providing you with more options to navigate unexpected expenses or make lifestyle changes.

How AI Can Help You Prepare for Portfolio Reviews

You have chosen to allocate a portion of your salary into your investments. It makes sense for you to care about its performance. Here’s how I believe AI can offer a valuable advantage. Think of AI as a buddy who you can use to suggest questions you’ll ask during your next portfolio review.

I like to use ChatGPT to bounce off ideas. By providing it with details about your current situation, ChatGPT can help you identify critical questions and metrics to such as:

You can also ask follow-up questions to let ChatGPT elaborate on specific terms or suggestions so that you can understand the questions and metrics better. This can help you feel more prepared and confident, ensuring that your next portfolio review is productive and focused on achieving your goals.

Whether you’re looking for ways to optimise your investments or make changes to accelerate your retirement plans, using AI can be a smart strategy to formulate your thinking and tighten your ideas before discussing them with your financial advisor..

The Benefits of AI in Personal Finance

AI has become an indispensable tool in personal finance for me and it can definitely help investors like you take charge of your financial journey. By simulating conversations and suggesting key metrics to focus on, AI can help you make sense of difficult financial topics so that you can work better with your financial advisor to build an investment strategy tailored to your retirement goals. Think of AI as your financial buddy, giving you the insights you need to achieve financial freedom faster and with fewer missteps.

Take Control of Your Portfolio Reviews

As you continue your journey toward financial independence, don’t let portfolio reviews become an afterthought or just a paper exercise to get over and done with. Regularly assessing your investments with a focus on the right metrics can help reveal whether your current strategy aligns with your future goals.

With the right knowledge—and a little help from AI—you’ll be well-equipped to make smarter decisions and take control of your financial future.

So, before your next portfolio review, consider using AI to practice. Armed with the right questions and a deeper understanding of your metrics, you’ll be able to approach your financial advisor with confidence, ensuring your portfolio is positioned to help you reach financial freedom as soon as possible.