“Organizing is a journey, not a destination.”
Do you get nightmares, trying to manage your investments and putting together the documentations? If so then probably it is time that you clean your investment portfolio. Generally, lack of experience and misleading financial advice leads investors to end up with a cluttered investment portfolio. The mess that an investor’s portfolio looks is mostly because although he invested, he never planned his investments well. The result of which it leads to a cluttered portfolio with too many financial products which he does not know what to do with it or how to manage it. In fact, it is quite possible that he might have even lost the track and does not even know some of them exist. So, an investor should start by listing of all his investments—each stock, bond, funds or insurance etc. that he owns and the amount invested in it.
Here are some smart ways that can help you clean up your cluttered portfolio:
- Revisit your financial goals: Important step here is to, remind yourself of your investing goals. Ask yourself questions like “why do I own a particular investments in my portfolio?” “Is it meant to provide me with regular income? Or it is invested for my retirement?” while doing so remember to remove the overriding goal investments. The main focus of de-cluttering your portfolio is to make it accomplish its purpose i.e. help you to achieve your Goals.
- Follow asset allocation strategy: Asset Allocation is the process of spreading your investments across asset classes so that your exposure to any one type of asset is limited. It helps to reduce the volatility of your portfolio & also helps to balance risk and reward of your investment portfolio over time. Asset allocation is different for every investor depending on his goal, risk profile & time horizon. An optimum asset allocation helps to minimize the volatility and maximizes returns of the portfolio.
- Get Rid of Investments no Longer fit / under-performing categories: Once you have revisited you financial goal and finalized your asset allocation strategy, study which investments that are worth keeping and get rid of the investments that no longer fit your goal & risk appetite. Avoid the duplication of investments and the under-performing categories. This will help you in to figure out whether your investments have outperformed their peers. Keep a note that while past performance doesn’t guarantee similar performance in future, but this comparison will give you a fair idea of how well your investment portfolio is suited to the varying market conditions in future.
- Consider taxes on your investment: As you de-clutter your portfolio, don’t forget about taxes. When you sell or redeem you investments, you might have to pay taxes, either on long term or short term capital gains or on dividend or interest. Make sure you have studied that as well. Also, remember that your investment losses can offset some of your income. It is possible to set off your losses with income you earn to reduce your tax liability. Taxes are an important part to consider while you are making any investment.
- Re-balancing your portfolio: Once you have de-cluttered your Investment portfolio, remember to review it at regular intervals, at least once a year. Portfolio re-balancing safeguards the interest of an investor from being overly exposed to undesirable risks. Generally, due to the market cycle of every asset class the portfolio tends to change its alignment which in turn can affect your portfolio and can make it biased towards one asset class. This would assist your portfolio to be in line with changes in your risk appetite, financial goals, various macro-economic factors and funds’ fundamental attributes. While it is important to review your investments on a regular basis, making changes to your portfolio to re-balance is also equally necessary.
A streamlined portfolio allows you to focus on improving your overall risk-adjusted performance rather than trying to determine how it all works. It is important to have a simple and sorted portfolio aligned to your goals.
Hope these points will help you to save your investment portfolio to stay aligned. This should also help you keep your financial house in good shape for all the seasons yet to arrive.
If all this is too confusing, then give us an opportunity to help you optimize your portfolio. Connect with us.
A Good advice is always worth listening!!!
About Us: Malpani Investments specializes in Investment Advisory and Planning. Our Mission is to provide financial freedom to our clients by understanding their financial goals and helping them plan, save, invest and be disciplined, so that they can stop worrying about money and lead a happy and healthy life. We help them understand personal finance in order to eliminate the gap between where they are now financially and where they want to be. Helping them with a suitable investment decisions so that they can give more time to their family, health and life aspirations. [email protected] / +91-7738637572