Advanced Investing – Making Quarterly Portfolio Adjustments

So, you’ve got a few bucks in the brokerage, 401k and/or IRA account – but you do realize they won’t manage themselves, right? You can either pay someone else to do it for you or, spend an hour or so 4 times a year and quite possibly end up with a lot more money when you quit working.

design-investment-portfolio How much more?

A systematic rebalancing of a moderate $100,000 portfolio can save you the 1% or 2% Mutual Fund management fee as well as lock-in gains helping you sell high and buy low. A properly executed plan removes emotional responses to market fluctuations and can save you transaction fees.

If you increase your net return by 2%, say from 5% to 7%, over 30 years your $100,000 will be worth an additional $329,032 or 76%.

What can you do with an extra $$329k when you’re 65? Visit the Taj Mahal? Finally take that Scandinavian cruise with the St. Petersburg stopover? Keep your own home…

Devoting a few hours per year to rebalancing your portfolio will make you a money master instead of a financial f***up.

Here’s the step-by-step to rebalancing your portfolio:

1. Dig out your portfolio plan – you DO have a plan?

If not, read Build Your Portfolio at J.P. Morgan or pick one from Morningstar’s file

then make a copy of this Asset Allocation Spreadsheet and fill it in with your own data.

2. Open your account statement or print out the holdings in your online account.

3. Input or download the current portfolio components to Quicken or Mint or your Asset Allocation Spreadsheet

4. Compare the current asset allocations with your planned allocations.

5. Make a list of holdings to sell (from the categories with excess allocations)

6. Make a list of the types of assets you need to add to your portfolio (from the categories under allocated).

7. Place your sell orders.

8. Research assets to add to your portfolio –

you may want to add to current holdings instead of finding new ones if you really want to minimize the time you spend on research.

9. Place orders to purchase assets.

10. Update your records: Quicken or Mint or your Asset Allocation Spreadsheet

11. Open your calendar and make an appointment in 3 months to repeat the process.

12. Reward yourself – you’ve just completed a simple but powerful wealth building activity.

Give it a try – then let us know how it works for you in the comments below.

Also, please share this system with your friends and loved ones – you’ll want someone to share your cruise cabin with on your retirement trip!

Live Long and Prosper – Leah

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