Tips for investors on how to regularly monitor your portfolio to make sure things aren’t going awry, and how to know when to pivot.
When a reporter asked baseball great Yogi Berra if his struggles at the plate signaled a slump, Berra replied, “Slump? I ain’t in no slump. I just ain’t hitting.”
Sometimes even the best athletes experience stretches where nothing seems to go right. And when this happens, they often work with coaches, take time off, or study videotape to diagnose problems. As an investor, you’re also bound to hit soft patches, and, like an athlete, might benefit from some tips and self-evaluation.
Has the market thrown you a curveball? Here are some things to consider that might help you get back in a better groove.
First, make sure you’re regularly monitoring your portfolio. If you don’t spend enough time examining your investments, you could fall behind and not even know it.
“Spend as much time per quarter looking at your future and investments as you do planning your vacation,” said JJ Kinahan, chief market strategist for TD Ameritrade.
One reason you could be struggling is your asset allocation. Perhaps your portfolio is weighted too heavily in a certain sector of the stock market, or even a certain stock. When that sector or stock takes a hit, it could bite you. Or maybe your stock allocation has exceeded a comfortable amount, perhaps due to a rally. This could make your portfolio more vulnerable if a correction occurs.
“At least once a quarter, check your portfolio and make sure it’s in alignment with your goals,” said Ryan Campbell, CMT content manager at Investools®, the educational affiliate of TD Ameritrade. If you find you’re over-weighted in a particular sector or type of investment, it might be time to consider reevaluating and realigning.
“Realigning your portfolio is the essence of buying low and selling high," Campbell continued. "You’ve made money somewhere; then take some profits. You don’t to have to sell all of it. This way, if the stock keeps climbing, you still make money. Then reinvest those profits in areas of your portfolio that are ‘low.’”
If things aren’t going your way and you regularly trade the markets, it might be time to consider reducing the size of your trades. That way, if things keep going badly, you might not be out as much money. Meanwhile, you can step aside and figure out what's wrong.
“Don’t trade as big,” said Kevin Hincks, senior specialist, Trader Education, and Swim Lessons co-host for TD Ameritrade. “Make smaller bets and reevaluate.”
It's a little different for long-term investors who don't trade as often, but even if you don't move in and out of the market too much, making a sudden decision to sell when the market is going against you isn't always the best decision. It's not good to allow fear be a motivator. Instead, consider standing back and not doing anything rash with your money. Now could be the time to do some assessment before making any sudden moves.
Hincks suggests examining the things you might be doing wrong to find out what’s hurting you. There are many mistakes you could be making, whether you're a long-term investor or a trader.
Are you chasing the market upward and not buying dips? Are you getting out of winners too early? Are you trading for the sake of trading, without a game plan? Are you properly diversified? Do a good self-evaluation and don’t go easy. Pretend you’re a coach trying to help a slumping player.
If your self-evaluation isn’t enough, remember that TD Ameritrade offers its clients a variety of online tools that might help get you back on track.
Log on to the site and use the Portfolio Planner to help you allocate.
It’s fair to say that no investor can completely avoid adversity. But it might help to create a daily habit of taking five minutes to look at what went right and what went wrong. That way, you might be less likely to get into trouble in the first place.
“It’s a lot of second-guessing yourself and evaluating,” Hincks said.
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