As a new year starts, get all your information together, thoroughly analyze it, and clean up your portfolio. Some points to consider during this review include:
- Take another look at your asset allocation plan. Do this before you review your actual investments, so you aren't influenced by your current allocation. You may now realize that your risk tolerance is lower than you originally thought, so some changes to your allocation may be needed. Or you may realize you need to increase your allocation to one investment category or another to reach your financial goals.
- Find your most recent statements. List each investment and its current value. Total your investments by category - cash, bonds, and stocks. Then compare those percentages to your asset allocation plan. If you haven't done this review in a while, you're likely to find your current allocation is off.
- Decide how to get your allocation back in line. Look for ways to accomplish this as soon as possible.
- Get rid of small accounts. It's not unusual to find you have several small accounts. Perhaps you have a bank savings account with several hundred dollars in it that you don't use anymore. Or you may have a small investment account that you received as a gift. The accounts may be so small that you haven't taken the time to cash them out. But you still have to look at the statements every month and make sure any income is included on your tax return. Consolidate the funds in one account.
- Look for ways to simplify your investments. Do you have a variety of individual retirement accounts (IRAs) that can be consolidated in one IRA? Do you own similar stocks or other investments that aren't adding much in the way of diversification? While you want to be properly diversified, minimize the number of accounts and investments you own so your investments are easier to monitor.