(ThyBlackMan.com) One of the most common pieces of investment advice you will here is about the importance of a diverse portfolio. While this is invaluable and protects you against risk, it can lead to problems.
A scattergun approach to investing can lead to just as many issues as keeping all your eggs in one basket. Not only that, of course but the more investments you have, the more complicated it is to stay on top of them. The answer lies in simplifying your portfolio – and here are some tips to try out.
Automate your portfolio
Modern technology is a wonderful thing, especially for investors. The first step towards a simpler portfolio is to automate everything, so you don’t need to do everything manually. There are hundreds of different, free automated investment tracking tools out there, so take a look around and see what you can find.
Avoid the esoterics
There are lots of exotic, weird and wonderful ways of investing your money these days. And the pull of these new platforms can be strong. But the simple truth is that you can achieve an effective strategy just by sticking with what you know. The essentials of investing – stocks, bonds, and cash – are more than enough to build wealth by themselves.
Explore target-date funds
Let’s say you have investments in three funds. As examples, let’s use total bond market, total U.S. market equities, and total international assets. What would you say if you could reduce that to a single position? It’s easy enough to do if you look into target-date funds. It involves investing in a single, all-encompassing fund that holds all your others within it.
Look at 1031 Exchanges
Let’s say you own several rental properties that all provide you with a valuable income, but pay rent on your business’s offices. By using the 1031 exchange tax rule, you could sell all your rental properties and buy the building you are renting in. You can then spend the difference on upgrading your new building so it has a whole bunch of new offices – which you can rent out. Not only will this give you further income, but when you pass it on to your heirs, they mightn’t be subject to the same taxes.
Investigate indexes
Indexes give you returns based on the markets decision. In other words, you don’t have to try and beat the market. When you take out index funds, your money is linked to your asset, regardless of the fund manager or strategy changes. They are low-maintenance, and they can give you a good return as you miss out on those expensive middleman payments.
Stick with a one fund family
As we mentioned above, there are many complications involved when you have investments to maintain in your portfolio. It also makes things very tricky around tax time. You can often need to pay out a considerable amount in accountants fees to ensure your taxes are on the right track. However, by investing in a single fund family, you get everything in one place – and they are so much easier to maintain.
Staff Writer; Rob Newton
