Not everyone has the time or patience to develop the skills needed to be a stock trader. But that doesn’t mean that they can’t grow their wealth in the stock market.
According to Morningstar personal finance director Christine Benz, various kinds of investors could utilize their portfolios in simple ways to fit their personal plans.
She herself has helped millennial couples to baby boomers in overhauling their investment portfolios to achieve home buying and retirement plans. These are the two helpful takeaways that she’s realized after working with these clients.
Keeping Things Simple
Benz is also the author of the book ‘Morningstar Guide to Mutual Funds: 5-Star Strategies for Success’
The first thing Benz has realized in her work is the importance of keeping things simple. She notes how complex some of her clients’ portfolios are and how much less complicated they can be in an interview with Business Insider.
Benz advises all kinds of investors to streamline their holdings when looking over and evaluating it. Meanwhile, she also tries to help them recreate their portfolios into something that will require less ongoing oversight.
For example, moving from one job to another will likely result in more than one IRA or 401(k) rollovers. In this scenario, a person would find it best to combine all these to avoid having two of the same investment instrument as well as to prevent paying multiple fees.
Benz also pointed out how she notices a lot of overlaps in people’s holdings and individuals who have a sort of ‘half-hearted’ stock portfolio that they don’t put much effort into. In the end, she reiterates that going for simpler investments would require less attention from investors.
Another thing she emphasized is viewing one’s portfolio less. A once a year check-up may be enough for most people and would help them avoid trying to make frequent unnecessary changes in their investments.
Looking Beyond the Portfolio
To be successful, an investor should also learn to pay attention to things outside their portfolio although this may seem like a counterintuitive habit. In fact, Benz’s advice for clients seeking an investment profile makeover usually has something to do with their long-term financial plans and not just their holdings.
This is because investing won’t be a cure-all that could address an investor’s otherwise poor financial decisions.
As Benz put it, there is a misconception that working on the portfolio level can save people from other financial mistakes like undersaving for their retirement. She has also found that decisions like budgeting, Social Security claiming, and when to stop working are the ones that end up having the most impact on a person’s financial well-being.
