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However, there’s always room for improvement, so with that being said, some top issues that impact portfolio optimization today include:
📌 Portfolio sprawl: AKA too many accounts, holdings and redundancy in your portfolio. Benz suggests consolidating accounts and using index funds for simplification and diversification.
📌 Redundant individual-stock portfolio: Some investors hold individual stocks that duplicate what's already present in their mutual funds or ETFs. This can introduce unnecessary risk and oversight responsibilities.
📌 Also-ran mutual funds: Investors sometimes hold mutual funds that have had multiple manager changes, poor returns and large asset outflows. As such, reviewing and pruning underperforming funds is necessary.
📌 Asset allocation not informed by the plan: A common problem is when your portfolio doesn't align with your actual retirement plan. Many retirees hesitate to de-risk their portfolios by including safer assets, which can lead to sequence risk.
📌 Suboptimal asset location: Watch out for having tax-inefficient assets in taxable accounts and tax-efficient assets in tax-sheltered accounts. Asset location adjustments are crucial to optimize tax efficiency.
Ask yourself: Are you making any of these mistakes? Maybe it’s time to step off the sidelines, dig deep into your portfolio and create a greater opportunity to optimize your financial wellbeing.