A collection. What comes to your mind? Maybe it's those silver coins you inherited from Grandpa, a book of vintage stamps, or that Mickey Mantle or Hank Aaron rookie baseball card. Whatever it may be, you most likely have a collection of value – sentimental, financial or both.
Then there are those other collections. The kind that clutter, detracting from rather than adding value to your life. Clutter is particularly damaging when it happens to your investment portfolio.
Collecting versus Cluttering
A few years ago, my wife and I moved into a new home. Nine years prior, we had moved into our first house using the smallest U-Haul. As years passed and kiddos arrived, I was shocked and a little embarrassed by the massive collection of stuff we had accumulated, crammed into the closets and forgotten in the garage. We needed the largest U-Haul for our next move, and that was after a massive purge!
In my years of experience as an investment adviser, I have seen my fair share of these same sorts of investment collections in place of cohesive strategies.
I once had a prospective client tell me that, after many years of saving for retirement, he and his wife's investment portfolio reminded him of their garage, packed so full, they had no idea what was in there. What they had was simply a collection of assorted mutual funds, stocks, Certificates of Deposit, bonds and other financial products that resembled anything but a cohesive strategy. Financial clutter.
Investment Clutter Can Create Retirement Risks
There are many reasons why investment clutter can be problematic for you and your retirement. For starters, if you're unsure of what you own, it's also likely you don't know what you are really paying in expenses and fees. (Trust me, if your broker said that bond he sold you was free, please read our post on Financial Fee Transparency.)
To make matters worse, your random collection may be far more risky then you imagined or desired. Financial risk can rear its ugly head in a multitude of ways. It can appear when you don't have the correct asset allocation (stocks vs. bonds). Instead of being accidental, your allocation should be designed and maintained to meet your future retirement income needs while dampening the market volatility along the way. Risk also can appear when you are under- or over-exposed to certain parts of the capital markets. And it can cost you dearly if your collection of investments are not vey tax-efficient.
Bottom-line: The first step toward creating a cohesive investment portfolio is admitting your collection is actually just clutter. Next, find a fee-only, independent Registered Investment Advisor firm that acts as a fiduciary to give you an objective assessment of where you stand, and what may need to change to better reflect your intent. The end goal should be converting your collection into an efficient investment strategy that matches your unique investment needs and goals.
We at Fort Vancouver Investment Management are happy to review your investment collection anytime, and suggest a practical, tailored strategy for clearing out your cluttered portfolio. Why not take on a "spring cleaning" this fall, by giving us a call?