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3 Things to Know About Your Investment Portfolio

Kate Furlong



If investments aren’t your specialty but you know that you really should be paying some attention to your holdings, here are a few things you should keep on top of to make sure that your portfolio is on the right track.

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Your asset allocation. Your asset allocation is the mix of stocks, bonds (also known as fixed income) and cash that you have in your portfolio. Because stocks and bonds can behave differently in different markets, holding both helps you diversify, which can increase your risk-adjusted reward potential. The percent of your portfolio that you want to hold of each asset class will depend on things such as your risk tolerance, your age and your goals. For example, in general, a younger investor will hold less fixed income than an older one because he has more time to ride out volatile market cycles.

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Once you have determined what allocation feels right for you, make sure to check in every six to 12 months to rebalance your portfolio. You want to ensure that your desired allocation is still in place and that it hasn’t inadvertently shifted off course due to one asset class outperforming the other.

Your basic holdings. You also should dive a bit deeper and understand, at least broadly, what types of stocks, bonds or funds you are using to achieve your desired asset allocation. For example, within stocks, you might hold European, U.S., Emerging Market equities or all three. And you may also hold both large-cap companies, such as Microsoft or Johnson & Johnson, as well as some mid-cap stocks, such as Delta and Macy’s. These underlying holdings can help you further diversify your portfolio, protecting you from being exposed to only one part of the market.

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What fees you are paying. Fees are an unavoidable part of investing. However, the fee structure of different investments can vary quite a bit and, over time, an investment with high fees can really eat away at your performance. You should always look at your investments on an after-fee basis and, when you do, you’ll often see that an investment that appears to be achieving higher returns may not actually be doing so once you account for the fees you’re paying. Actively managed funds tend to have higher fees than passively managed index funds that simply track a large basket of securities in the market. Try to target fees on most of your holdings to be below 1 percent, though many index funds will offer you even lower ones, closer to 0.20 percent or less.

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