Don’t wait until the end of the year rush to assess your investment portfolio. Whether you have an employer-sponsored retirement plan, a brokerage account, or both, you still have time to improve your strategy this year.
Take a look at these tried-and-true investing strategies you can put into practice anytime.
1. Choose an appropriate asset allocation
How you divide your investments among major asset classes such as stocks, bonds and cash equivalents has a major influence on the returns your money will earn. Each asset class tends to react differently to market and economic conditions, so by dividing your money among them, gains in one asset class may help offset losses in another. The asset allocation that’s right for you depends on your goals, timeline and risk tolerance.
2. Maintain a long-term outlook
Investment prices routinely experience ups and downs, called volatility. If you don’t intend to tap your investments for many years, the day-to-day and even year-to-year performance shouldn’t be a major concern. What matters is the result at the end of your investment period. Historically, over the long term, the direction of the stock and bond markets has been up.
3. Take advantage of dollar-cost averaging
A systematic investment plan, often called dollar-cost averaging, can help manage volatility and even make it work in your favor.* It’s a very simple strategy: You invest a set dollar amount at regular intervals, regardless of what the market is doing. That way, you don’t risk buying all your shares at the “wrong time.” You buy fewer shares when prices are high and more shares when prices are low.
If you invest in a 401(k) or other retirement plan at work, you’re already taking advantage of this approach with payroll deduction.
4. Rebalance regularly
Rebalancing means to adjust your portfolio periodically to keep it in sync with the target asset allocation and risk level you’ve chosen. For example, say you chose an asset allocation of 60% stocks, 30% bonds, and 10% cash equivalents. If stocks did well since then, your allocation may have drifted to 67% stocks, 25% bonds, and 8% cash equivalents, a more aggressive mix than you first committed to.**
To rebalance, you can sell shares in the asset class that’s overweight and use the proceeds to buy more assets in the underrepresented classes. Or you can redirect future money to the underweight classes to realign your portfolio over time.
5. Schedule a portfolio review with a professional
An honest assessment of your portfolio by an objective party boosts your confidence that your investments are working for you and will serve you well no matter what the year ahead brings. The financial consultants at Hanscom Investment Services† can help you understand your options for saving and choosing the investments that are right for you. Schedule a free consultation at https://www.hanscominvestmentservices.org/or call 800-656-4328 ext. 2236.
* Dollar-cost averaging (systematic investing) cannot guarantee a profit or protect against loss in a declining market. You should consider your ability to continue investing during periods of low price levels.
** Asset allocations are hypothetical and not intended to suggest appropriate allocations for any individual.
†Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Hanscom Federal Credit Union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Hanscom Investment Services, and may also be employees of Hanscom Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Hanscom Federal Credit Union. Securities and insurance offered through LPL or its affiliates are:
Not Insured by NCUA or Any Other Government Agency / Not Hanscom Federal Credit Union Guaranteed / Not Hanscom Federal Credit Union Deposits or Obligations / May Lose Value
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