|First, dispose of things that aren’t working. If a long-term investment hasn’t performed well, you may be better off by replacing it.
Next, get rid of duplicates. For example, if you own several stocks issued by similar companies, you could incur problems if a downturn affects the industry to which these companies belong.
Finally, put things in order. Over time, your portfolio might have become too aggressive or too conservative. Try to restore your portfolio to its proper balance, one that reflects your risk tolerance, time horizon and long-term goals.
By doing some spring cleaning on your portfolio, you can keep it positioned to help you make progress toward your key financial objectives.
Evaluating Investments’ Performance
It’s obviously important to evaluate your investments’ performance. But when you do, try to avoid these mistakes:
First don’t look at a short time period. Instead, review an investment’s long-term track record. While it’s true that “past performance can’t guarantee future results,” it’s useful to evaluate an investment’s returns in different market environments.
Next, consider the impact of contributions and withdrawals on your bottom line. How much you put in or take out will affect your overall balance, but these additions and subtractions can also mislead you about your investments’ actual performance.
Also, distinguish between “growth” and “income” investments. Income-oriented vehicles may not contribute much to the growth you look for on your investment statements, but income is a key investment goal.
Finally, don’t construct your investment strategy on unreasonably high returns. You’ll have a better chance of reaching your goals if they’re based on realistic assumptions.
Contact Wendell at Edward Jones www.edwardjones.com.