Guidelines for simplifying your investment portfolio
THE STACK #13One of the things I see new investors do is try to implement every investment strategy out there.
They want to own everything that everyone recommends to them. This is a recipe for disaster.
When it comes to investing, you have to learn how to quiet the noise and pick (and stick to) a strategy that works for you.
The more complicated your investment portfolio gets, the harder it will be for you to manage.
It might not seem like such a big deal with $2,000, but by the time your investments grow to $20,000, $200,000 and even $2,000,000 (yes, we are claiming that 2M in our portfolios), you might have a nightmare on your hands….I mean, I’ll take a 2M messy portfolio any day, though…but you get my point.
Here are some guidelines for how to simplify your investment portfolio.
THE STACK
Brokerage (Investment) accounts
Recommended: 1
Max: 3
RRSP accounts
Recommended: 2 (1 employer and one self-directed)
Max: 2
Seriously, if you have more than one self-directed RRSP, merge them, call your brokerage to ask how
TFSA accounts
Recommended: 1
Max: 2
Mutual Funds / Index funds
Recommended: 3
Max: 4
ETFs
Recommended: 3
Max: 4
You shouldn’t have more than eight index funds/ETFs combined.
These are already heavily diversified, and having too many leads to over-diversification, which could dilute your portfolio and lead to subpar returns.
Stocks
Recommended: 4
Max: 10
If you've done proper stock research, you would know it's no joke.
Proper stock analysis requires a considerable amount of time and effort.
Invest in a small number of really great companies at any given time instead of a large number of mediocre companies.
Focus on increasing the number of shares owned; that's what great investors do.
Bonds
Recommended: Buy as an index fund
GICs/CDs
Recommended: 0
Unless for short-term savings, we're only talking about investing here, so.....
The goal is to invest and chill, not spend every day worrying about how our investments are doing and figuring out how to manage and rebalance our portfolio.
The fewer Index funds/ ETFs/Stocks you have, the more you can increase the number of shares you own, which will help you see a much more significant impact on your returns.
THE TOOL
See all your investments in one place
I love being able to track my investments using the Wealthica app.
You can keep track of your investment performance, track your dividends and net worth
Plus, It's free to use!
THE ACCOUNTABILITY
Are your investments all over the place?
Consolidate them today.
Do you have an old employer RRSP that you still need to roll over?
Call the financial institution and move that money into your new employer RRSP, Robo-advisor or self-directed RRSP.
THE COURAGE
THE KNOWLEDGE
BROKERAGE
An institution that acts as a middleman between an investor and the stock market.
INDEX FUNDS
This is a basket of stocks and/or bonds. When you buy an index fund, you own a piece of all the companies in that fund.
Index funds are bought and sold directly from a fund manager.
ETFS
This is an index fund that is traded on the stock market, just like a stock.
That's it for this week's STACK!
Talk to you next week,
But until then...Keep Stacking!
about the newsletterEvery Saturday, subscribers will receive one money tip, one tool, one actionable step, one word of courage and learn a new finance term to help you gain control of your finances in less than five minutes.
Free resourcesKeep reading the latest NEWSLETTERS