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Wall Street Steward Blog

Porfolio Resolutions of the Rich and Famous

We are now a full 4 weeks into 2012 – how are those resolutions holding up?  I have never understood why we need a new calendar year to decide to commit to something that we know we should have done years ago.  

Here is a list of basic things that every investor can do in 2012 to improve their investment portfolio, while also simplifying their lives:

  • Create an emergency fund.  Some advisors say this should be equal to 12 months’ living expenses.  I will settle for 3-6 months worth, but I do want you to have one.  No reason to invest dollar one until this is complete.

  • Review every investment.  Sit down with your advisor and talk about every single holding that you have.  Even the investments that you have with other advisors – ask for second opinions.

  • Check retirement goal progress.  Are you on track to retire at age 65, or behind schedule?  Are you saving enough to retire when and HOW you want to?  Ask your advisor these questions, and make appropriate changes if needed.

  • Fee check.  How much is “account X” charging you to manage your money?  What services are they providing?  One way to improve performance is to pick better options, but another way is to cut fees.  Know all of the fees for each holding, and on a case by case basis, decide if they are worthy of that cost.

  • Begin a systematic investment plan.  Not a retirement account…you should already have that.  I am speaking of an account where you contribute $100 per month and forget about it.  Assuming a decent rate of return, you will be stunned at how this type of account can grow.  This is an easy step, but very few people can execute it.

  • Learn the meaning of “asset allocation” and “diversification.”  Both of these are sound financial concepts that I believe in wholeheartedly.  However, many times they are misunderstood.  Both concepts have “cons,” as well as “pros.”  Learn them.

  • Liquid cash update.  What rate of return are you earning on your liquid cash?  If your money is in a checking or savings account, the answer will begin with “zero point….”  There are alternatives that can potentially earn much higher interest rates, albeit with slightly more risk.  Increasing the return on liquid money can make a huge difference over time.

  • Rebalance your portfolio.  Ahhh, this is a tough one.  Many times it means selling winners and buying losers, and although that seems counterintuitive, it is a necessity for good portfolio management.  This is especially important in your retirement account, as that account is the one most likely to be neglected by your advisor.

  • Consolidate loose-end accounts.  If you have similar accounts spread amongst 3-4 places, please do us all a favor and pick one spot and simplify.  It will buy you better service with that one advisor, and it will make it easier to monitor your money.  Also, it will likely save you from some nickel-dime fees.

  • Read my blog.  Many of you have told me that you like my writing in Progress Way, and I appreciate that very much.  However, if you would like to read my articles more often than 4 times per year, check out www.wallstreetsteward.com.  It is a bit more candid, with some humor thrown in, but still very educational.  Oh, and if you like it, please tell a friend or family member.  There is no bigger compliment someone can give me than to read my blog.

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    Those should keep you busy for the rest of 2012, and when 2013 gets here, pull this article out and start all over.  We all know how resolutions go, right?