How to Optimize Your Investment Portfolio
When it comes to retirement investing, as we’ve said several times, simpler is often better. And the first step to making investing easier and more efficient is to optimize your portfolio.
“You will have fewer holdings to track and this will allow you to focus on the really important issues like allocating your assets and whether you are on the right track to meet your financial goals,” writes Christine Benz, director of personal finance. Morningstar.
Here’s how Benz does it.
Merge accounts
If you’ve swapped jobs or opened multiple different accounts, combining them can help you not only keep track of where all your money is, but also minimize fees and spend less time choosing different investments for each one.
“Old 401 (k) assets and smaller IRAs can be combined into one large IRA in your name,” says Benz. While you can probably carry over your old 401 (k) to your current 401 (k) if you are offered one, IRAs usually offer better funding options and potentially lower fees, so make sure you factor in these considerations before migrating. your bills. Here’s some information on how to do it .
Rely on aggregate market index funds
If you invest in general market funds – mutual funds that reflect the general benchmark of the stock market – then you really don’t have to choose too much: pick a US market fund, an international fund, and a bond fund, and you’re most likely good.
“These funds need to be very inexpensive, and they make it easy to monitor the asset allocation of your portfolio,” Benz writes. “They’re usually pretty tax efficient as well.”
If these funds make up the majority of your portfolio, then you are also driving down costs by making other types of investments (industry-specific funds, style-specific funds, or regional assets) “surplus,” Benz writes. This simplifies the task and takes some of the pressure off you, the investor.
Increase your cash reserves
Finally, rethink your cash options, Benz says to Money.com . Using your broker’s default options for storing funds may not work best.
“Instead, check what’s available in online savings accounts,” Dengi writes. “The recent hike in interest rates and fierce competition to acquire new customers have sparked a price war among the major online banks.”
You will find online accounts with savings rates up to 2.25 percent ( see the highest rates here ). CDs may also work, depending on your needs .