Keeping It Simple:  The Benefits of Simplifying Your Investment Strategies

Keeping It Simple: The Benefits of Simplifying Your Investment Strategies

February 03, 2024

your tolerance for the risk of financial loss. Like this Forbes article says:

“When people gamble on sports, they generally bet all their money on one team. If their team wins, they reap the rewards. And if their team loses? They lose it all.


“When you invest, you don’t have to bet it all on one team. Instead, the best policy is to divide your money among different types of assets. This is what we call asset allocation—done right, it safeguards your money and maximizes its growth potential, regardless of which team is winning in markets.”


Consolidation can help eliminate gaps and overlaps. Help you right-size exposure to particular sectors like geography, industry, company size – and, to the business risk of individual companies.

And in terms of time management, if your accounts are spread across several different institutions, moving them to a single  custodian can decrease the number of statements you get &the login details you need to remember.

2. Rebalance Regularly

Whether you like a portfolio that is a targeted mix of stocks, bonds, and cash or “cash-like” investments, or one that includes crypto and other more aggressive investments, it is important to regularly rebalance your accounts so that they reflect your desired asset allocation.

We aren’t recommending the use of funds over individually owned securities. But sometimes, for example in an employer-sponsored retirement plan or a small inherited IRA, you don’t have any choice about that. So, consider as an 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%, the result might overweight your accounts towards stocks. It’s a good idea to rebalance to your target asset allocation at least annually, or whenever your circumstances – or your investment goals – may change.

3. Make Investing Automatic

Putting your investments on autopilot might help you meet your goals over time. For example, making 401(k) contributions directly from your paycheck, non-retirement savings and investments via  automatic periodic transfers from your bank account. If you may be a senior obliged to take annual fully taxable Required Minimum Distributions (“RMDs”) from your IRA accounts, and don’t need that income to cover lifestyle expenses, then automate monthly withholding and distribute the rest straight to a non-retirement investment account to take advantage of the dollar cost averaging that current financial market volatility does offer.

4. Consult a Financial Professional

A financial professional can review your current investment allocation – even if it’s an accidental one -- and discuss with you how well it fits your investment goals, time framework, and financial risk tolerance. They might help you spot and correct redundancies or missing asset classes.

Once you have a suitable investment plan and have made any adjustments to bring your overall asset allocation into alignment with that risk tolerance and your goals and timetables, he or she can periodically review and revisit your strategies to confirm whether they continue to make sense for your situation.


Important Disclosures

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.