Jun '24 • General discussion
The 7 Most Common Investing Mistakes....
Mistake #7: Not Reviewing Your Investments Regularly
If you’ve gone to the trouble of establishing a clear investing plan – and you’ve put
together a diversified, well-thought-out portfolio of investments...it’s important that you
check in on those investments from time to time.
Investors need to evaluate and “rebalance” their portfolios on a regular basis to
make sure that the ratios of value in different investments have not become
undesirable.
In any given year, some of your investments will deliver better returns than others...and
this can impact your portfolio’s balance if you don’t keep an eye on it.
Here’s a simple example: If you have two investments in your portfolio and you wish to
maintain a 50/50 split between the two, you can invest an equal amount in each to start.
But that ratio – let’s say it’s $50,000 in each – will be impacted by the performance of
those two investments.
If the first one goes up 20% while the second breaks even, you’d now have $60,000 in
one investment and just $50,000 in the second – meaning your split will have changed
to 55/45.
That’s a simple illustration, but you can see how – with more investments in your
portfolio and greater differences in performance – your portfolio’s balance can easily get
away from you.
The simplest way to stay on top of this is to look at your portfolio’s balance at regular
intervals – quarterly or annually – and then adjust as needed.
You can make your adjustments by tweaking the contributions you make to each
investment at the start of each interval or you can sell some of the winning investments
and re-invest the proceeds in those who have fallen behind.
This may seem a bit counterintuitive – because, at the end of the day you’ll be
“rewarding” the losing investments in your portfolio. But the truth is reviewing and
rebalancing at regular intervals is an important part of a disciplined investing approach.
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The 7 Most Common Investing Mistakes....
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