Investing Tip of the Month from Morningstar.com
As they say, "It's been a year." Some people may not be happy with how their portfolios have fared. If so, some questions are in order.
Are you out of focus?
A clearly stated financial goal is easier to achieve than something vague or nothing at all. For instance, if your objective is financial income, you'll find red-hot--and volatile--growth stocks far less attractive than steady-eddy dividend payers.
Are you unintentionally concentrated in a few stocks?
You may find some stocks and funds have grown to dominate your portfolio. Growth is good, but if those investments suddenly head south so does your portfolio. Trim them back. Many experts agree any one investment should not comprise more than 10% of your portfolio.
Are you giving away money?
Fund investing greatly simplifies the lives of investors. But it doesn't come for free. Funds charge for their services. Even no-load funds, while cheap, charge. With more than 20,000 funds available today, you should be able to find one comparable to a fund you like at a cheaper cost. Does it make a big difference? Say you invest $10,000 in a fund that gains 12% per year before expenses and carries a 0.5% expense ratio and another $10,000 in a similar fund that also gain 12% per year before expenses but carries a 2.0% expense ratio. In 25 years the first fund will have earned you $45,000 more.
Are you in love with your investments?
Even if you've been done wrong by a stock or fund, you hold on in the hopes the situation will improve. Maybe it will. But maybe it won't. Be sure you know when you buy a holding under what circumstances you will sell. And then stick to your plan.
Are you better off in the hands of an expert?
Sometimes it's best to trust your investments to a financial planner. They are trained and expert at helping you set clear goals, focus on the investments right for attaining your goals in your timeframe, and keep your investments on course. And don't worry, because even investors who use financial planners are avid users of Morningstar products. They want to be educated consumers of investing advice.
Morningstar.com is great tool for new and veteran investors. It's chock full of unbiased analyst reports, tools for evaluating your portfolio, and lessons on how to invest. The best part is that it's free to all valid library cardholders! Begin now or learn more.