Now that the winter months are behind us, many people have already kick-started their spring cleaning routine. Many spring cleaning routines involve cleaning out the clutter and rejuvenating the inside of a home. However, for financial investors, in addition to being the perfect time to clean a home, spring is a great time to clean up their investment portfolio. If it has been sometime since last checking the performance of bonds, stocks, and other assets, portfolio spring cleaning is essential. To help financial investors with their investment portfolio cleaning, we put together some helpful tips to help them start their portfolio cleaning routine.
Handling several investment accounts is not only overwhelming and time-consuming, it can end up hurting investors who are unable to keep track of how all of their assets are performing. Consolidating investment accounts will better enable investors to easily monitor their portfolios. Better yet, it’s pretty easy to do. For example, streamlining several IRAs and old 401(k)s into a single IRA is often as easy as opening an account and doing some paperwork. When investors are juggling several accounts, it is much easier to ignore a portion, or all, of them. If investors do have several scattered accounts set up by various brokerages, trimming them down will consolidate their investments in one place, making it infinitely easier to manage.
In the investing world, managing an asset allocation is all about balancing risk against reward. If investors have been neglecting their investment portfolio for a few months or years, it is likely that their investments will not be in line with their goals. Without even noticing, an investor’s returns could be deceived and they could be facing more risk than necessary. When investors are cleaning up their portfolios, they should pay attention to how the bonds, stocks, and cash investment are split up. In some cases, investors will find that their assets have headed in the wrong direction. If this is the case, simply rebalancing their portfolio can help it get back on track. Lastly, an effective asset allocation software can investors more control of their assets, making them much easier to manage.
Ditch the low-performing investments
Almost every advisor experiences an investment that performs poorly no matter how long they hang on to it for. When investors have investments with sad performance, it is best to cut their losses and move on. If they have money tied up in a mutual fund or bond that is continuously underperforming, it may be in their portfolio’s best interest to face the faces and sell it off. Although it may hurt to cut losses, reinvesting the money from the sale of the asset could end up benefiting your portfolio in the long run. Most advisors and investors will rebalance their portfolio once a year. If investors don’t rebalance often, it is a good idea to add it to their spring cleaning to-do list.
Inspect fee’s closely
Pesky fees can be a damper on a portfolio. Investors who are oblivious to what their investments are costing them likely will not work out for them over time. When rebalancing a portfolio, it is essential for investors to pay close attention to how fees are adding up. Even with high performing investments that generate returns, its fees might be costing investors. In order to avoid these fees, investors should consider trading more expensive assets — such as actively managed funds — for exchange-traded funds. Exchange traded funds have fewer fees and are far more tax-efficient than more expensive assets.
Don’t forget about diversification
Portfolio diversification is a vital part of an investor’s financial strategy. Diversification enables investors to spread out their risk. If a large percentage of investments are taken up by stocks, a portfolio could be at risk if the market ever decided to tank. As investors restructure their portfolio, it is best to try filling it with diverse asset classes. Portfolio diversification can help protect investment portfolios from market volatility.
Now that spring is finally here, the last thing on financial investors mind is tending to their investments. However, in the midst of spring cleaning, an investor won’t want to leave out tidying up their portfolio from their cleaning routine. Getting a portfolio organized and back on track, eliminating fees, and saying goodbye to poor performing investments can set financial investors on the right course for a successful year.
In addition to cleaning up their investment portfolios, using an effective investment portfolio management software can help financial investors have a successful year. When it comes to elite portfolio management software, AlphaDroid is a financial tool that should not be overlooked. Using sector investment strategies, AlphaDroid provides investors with a systematic and disciplined way of capturing the best days while avoiding the worst. With AlphaDroid, investors can better analyze, construct, and compare different investment portfolios. Let AlphaDroid help with your portfolio spring cleaning routine, try a free trial of our elite financial planning software today!