When it comes to investing, having fewer investments might help streamline your portfolio to manage stress better. Here are some benefits of a simple portfolio and some ways to help you create one.
Unless you do not mind managing your investments as a full-time job, consolidating and simplifying your portfolio may help you keep track of assets and stay on top of your portfolio’s results more easily. Complex investments may cause you to make a mistake—and some errors might be costly.
Here are four steps you may take to simplify your portfolio:
If you have any “orphan” 401(k)s from former employers, you may want to consider transferring them into an investment retirement account (IRA) or your current 401(k). This consolidation might make it easier to see what your funds are invested in and ensure there is no overlap or that you are not overweighting a particular sector or fund. If your accounts are spread across several different institutions, moving them to the same custodian could decrease the number of statements you get and the login details you need to remember.
Whether you like a portfolio that is equal parts stocks and bonds or one that includes crypto and other investments, it is important to regularly rebalance your accounts so that they reflect your desired asset allocation.
Take, for example, a portfolio that consists of 70% stock funds and 30% bond funds. If the value of your stock funds increases 20% in a year while the value of your bond funds declines by 5%, your accounts may be overweight towards stocks. You could either direct all of your new investment funds to bonds until they are back to a 30% weighted allocation or sell some of your stock funds and use the proceeds to purchase bonds. This is an example only. Your circumstances and results may vary.
Like other types of savings, setting aside investment funds might be easier by using automatic withdrawals. Examples are 401(k) deposits taken directly from your paycheck and automatic transfers from your bank account. Putting your investments on autopilot might help you pursue your savings’ goals. If you get a raise, boosting your 401(k)-contribution rate may be an easy, painless way to increase your savings rate.
You may assume that you do not need a financial professional until you invest a certain amount. But whether you are just starting your career or are nearing retirement, a financial professional may review your assets, investments, and desired asset allocation and work with you on managing your investments. Financial professionals may assist when trying to slim down your portfolio, as they might help you spot and correct redundancies or missing asset classes.
Once you have an investment plan, your financial professional may periodically review your portfolio and revisit your strategies to make sure they make sense for your situation.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
Asset allocation does not ensure a profit or protect against a loss.
This article was prepared by WriterAccess.
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