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While “set and forget” investment portfolios may sound appealing, it’s essential to remember that this doesn't mean you should completely ignore your investment accounts. Every so often, they need a review. Here are the three important questions to ask yourself when rebalancing your portfolio.
Wealthfront advises that it’s crucial to ensure your portfolio is appropriately diversified, meaning you're investing in the right assets. As you approach retirement, for example, you might want to shift towards more bonds, which carry lower risk, and reduce your stock holdings. These are the three key questions they recommend you ask yourself:
What are my actual fees? Investopedia provides a detailed guide to investment fees here, and you can use tools like FeeX to assess your fees.
Am I holding too much cash? Having an emergency fund is essential, but excessive cash means missing out on potential investment growth. However, if you foresee needing a significant amount in the near future, keeping it liquid in cash may be the right choice.
Is my portfolio sufficiently diversified? It's important to ensure your assets are well allocated. Ensure you have the right balance of stocks, bonds, alternatives, and other assets.
These three questions are merely a starting point, so it's worth delving deeper into each one. For further insight, check out the link below.
Image courtesy of Alexander Henning Drachmann.
