Investing works best if you set it and forget it. However, at least once a year every investor should set aside some time to review their investment activities from the previous year. February is a great time to do this investment review because if you wait too long you’ll find yourself in the thick of tax season.
Photo by kaolazymonkey via Flickr.
1. Review and Rebalance Your Asset Allocation
Most investors decide to have a certain percentage of their investments in bonds and a certain percent in stocks (via mutual funds or index funds).
However, over the course of the last year those asset allocations have naturally adjusted.
For example, if you want to have 60% bonds and 40% stocks then after this last year you might now have 65% bonds and 35% stocks. Simply sell enough bonds to rebalance your portfolio so it reflects your desired asset allocation.
At the same time you need to ask if you should be changing your asset allocation. The older you get the more conservatively you should invest.
This is not something that should be done every month, just once a year.
2. Shop around for a new online broker.
Online brokers often change their rules, fees, and policies. Just because your broker was the best last time you looked around does not mean they still are the best.
Take an hour and compare your fees, fund offerings, and customer service with other online brokers. Another option is to check out this list of best investment brokers. If the difference is significant consider making a change.
3. Change your automatic deduction amount.
Many people, myself included, promote the idea of doing your investing automatically. The nice thing about automatic investing is that it is easy to forget it. Using this system you simply dollar cost average all of your investments. The only problem is that at least once a year you want to remember. If you invest based on your income (15% of your take home pay, for example) then you need to adjust your withdrawal amount based on your …