Investor Checklist: 5 Ways to Get Your Investments in Order

January 31, 2012

The New Year is often a time to get our investments in order.  Here are five ways to help you start this year on the right foot:

1. Set or Confirm Your Plan – Having a plan can help you stay focused in up and down markets so if you don’t have a plan, set one. Ask yourself why you are investing, determine how long you’ll be invested and what tools you’ll use to achieve your goals. If you already have a plan, reconfirm it.

2. Rebalance Your Portfolio – Re-position your portfolio to your target asset allocation between equities and fixed income to keep your portfolio aligned with your risk tolerance. The idea is that you sell a little of last years’ better performing asset class and use the proceeds to buy the weaker so that you bring your portfolios back into alignment with your original goal. Historically, a rebalanced portfolio has outperformed a portfolio that was not regularly rebalanced because rebalancing helps you buy low and sell high. Most investors will be selling bonds to buy stocks this year.

3. Get Back on Track If there are trades you’ve been putting off, this is a good time to get back with the program. In a new tax year, and after most fund distributions, there is little reason to stick with a fund that is underperforming its peers. Sell lagging funds and buy better performers.

4. Get Invested – If you intend to be invested, start putting your cash to work. Many investors are still on the sidelines, but stock prices are low compared with three years ago, and the more time you have to be invested, the better.

5. Automate Your Investing – Take advantage of tools that help you put more money towards your goals. Sign up to have a set amount invested each month with an automatic investment plan. If you meet the income limits, fund a Roth IRA with easy monthly contributions.

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