Weekend Reading: Are You Making These 5 Common Portfolio Mistakes?

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
Weekend reading 5 common portfolio mistakes Weekend reading 5 common portfolio mistakes
Weekend Reading

Whether you’re an experienced investor or not, here’s the good news: Morningstar’s Director of Personal Finance & Retirement Planning, Christine Benz, sees investors generally get much more right than wrong.


However, there’s always room for improvement, so with that being said, some top issues that impact portfolio optimization today include:

📌 Portfolio sprawl: AKA too many accounts, holdings and redundancy in your portfolio. Benz suggests consolidating accounts and using index funds for simplification and diversification.

📌 Redundant individual-stock portfolio: Some investors hold individual stocks that duplicate what's already present in their mutual funds or ETFs. This can introduce unnecessary risk and oversight responsibilities.

📌 Also-ran mutual funds: Investors sometimes hold mutual funds that have had multiple manager changes, poor returns and large asset outflows. As such, reviewing and pruning underperforming funds is necessary.

📌 Asset allocation not informed by the plan: A common problem is when your portfolio doesn't align with your actual retirement plan. Many retirees hesitate to de-risk their portfolios by including safer assets, which can lead to sequence risk.

📌 Suboptimal asset location: Watch out for having tax-inefficient assets in taxable accounts and tax-efficient assets in tax-sheltered accounts. Asset location adjustments are crucial to optimize tax efficiency.

Ask yourself: Are you making any of these mistakes? Maybe it’s time to step off the sidelines, dig deep into your portfolio and create a greater opportunity to optimize your financial wellbeing.