How can I declutter my portfolio?

KALAMAZOO, Mich. - Dec. 16, 2014 - PRLog -- Simplify, Simplify, Simplify: How to Streamline Your Financial Life

Kate Warne, Ph.D., CFA
Investment Strategist

Does everything seem too complicated today? You’re bombarded with more information at a faster pace. It’s easy to feel overwhelmed. Consider these ways to simplify your financial life by reducing the clutter and streamlining decisions you need to make. This can also help you better understand your financial situation.

Is your financial life too complicated? Simplification may be the answer – start with three questions that can help:

1. How can you reduce your financial paperwork and get a clearer picture of your finances?

Combining all of your accounts in one place can allow you to see your entire financial situation at once and help you stay on track toward your financial goals. Otherwise, you’ll have to add up all the various amounts in each of your accounts at different financial institutions. That’s especially important if you want to rebalance your portfolio to an appropriate mix of stocks and bonds. Having everything in one place can also help you:

Identify gaps in your investment portfolio or protection strategy that might not be apparent otherwise.
Simplify calculations and decisions if you are taking required withdrawals.
More easily review your beneficiaries and make other estate-planning decisions.

Consolidating your accounts can also help reduce the mountain of paper that arrives every month. You may also want to consider signing up for Online Account Access and e-delivery of your statements, along with shredding what you don’t need anymore. These actions may help cut through the clutter in your family room and file cabinet, but you may need to consider curbing any investment clutter, too.

2. Do you need to de-clutter your portfolio?

Do you know what investments you own and the role each plays in your portfolio? If not, you may want to review it with your Edward Jones financial advisor and make some changes, if needed. In particular, many people have cluttered up their portfolios because they have multiple retirement accounts. Or maybe you’ve bought a few stocks and bonds but failed to review whether those fit together properly into a well-diversified portfolio.

If you own individual stocks, check how they’re allocated across the sectors of the market, making sure you don’t have too much of any one. And with U.S. stocks hitting all-time highs this year, consider upgrading the quality of your stocks to those with solid track records of earnings growth.
If you own individual bonds, make sure they mature at different times and are from a variety of issuers operating in different sectors. That way, your bond portfolio is diversified so you’re not overly exposed to any one region or business.

3. How can you streamline your investment decisions?

Check your investment mix – Your investment mix plays a larger role in returns over time than the performance of any specific investment. That’s why it’s one of the most important decisions you make. And it’s important to keep your mix of stocks and bonds aligned with what’s appropriate for you. You may need to rebalance your portfolio by adding to some investments and/or reducing others. Then, review your portfolio’s components, such as the individual stocks, bonds, mutual funds, ETFs or unit investment trusts you may own.

Prioritize - You may have many financial goals – and some matter more than others. You may be able to streamline your decisions by using different accounts for different goals. That’s especially worth considering due to possible tax advantages for Roth IRAs for retirement or 529 education accounts, for example.

Stay on track - Markets seem to be moving faster, especially with the recent increase in stock market volatility. Simplifying your investment decisions may help you avoid any emotional reactions. You may think that market swings mean you need to make changes more frequently. But that’s usually not the case. In fact, most studies found investors had lower returns when they traded more often. Keep it simple by asking “Are we still on track?” rather than reacting to market moves.

Take the Next Step
"Simpler" doesn't mean the same thing for everyone. And it doesn't mean owning fewer investments – remember, diversification is critical for constructing solid portfolios.

Simplifying your accounts, your portfolio and your decisions can help improve your long-term prospects. You can focus more clearly on the financial decisions that have a greater impact and stay on a steadier path when markets are volatile.

Like all advice, it can't help unless you act. If you need to consolidate, de-clutter or streamline your financial life, talk with your financial advisor and consider making some changes today.

Diversification does not guarantee a profit or protect against loss. Past performance is not a guarantee of future results.